The pound finished last week almost exactly where it began, first falling versus the dollar until a sharp USD sell-off sent the GBP/USD through key levels. A relatively quiet week ahead may produce much of the same absent a surprise from a Bank of England policy meeting. Traders look to an upcoming Bank of England Monetary Policy Committee meeting for any surprises, but low FX volatility prices suggest few expect officials will make changes to policy or release a post-meeting statement. Economic releases will be limited to UK Markit PMI figures, Trade Balance data, and Industrial Production growth reports. It would take a material surprise out of any of these reports to force a meaningful reaction across GBP pairs. Markets remain indecisive as we’re now just a month away from the UK General Election, and current polling shows no single party is likely to take an overall majority following the May 7 vote. In effect, the United Kingdom could remain without an effective government for six weeks. The British Pound is likely to suffer amidst such uncertainty.
The euro advanced for a fourth day against the dollar after Greece pledged to make a payment to the International Monetary Fund on time this week. The shared currency climbed versus nine of its 16 major counterparts after Greece’s Alternate Finance Minister Dimitris Mardas said on April 4 the country will make the payment of about €450-million due on April 9. Greece must reach an outline funding agreement with its lenders at a meeting of euro zone finance ministers on April 24, its finance minister told a Greek newspaper on Monday. Greece offered a new package of reforms last week in the hope of unlocking remaining funds from its bailout program, but its EU and IMF lenders have yet to agree to the proposals. Athens has not received bailout aid since August, 2014, and has been hard pressed to cover payments amid a cash crunch, resorting to measures such as borrowing from state entities to tide it over.
The dollar edged higher against the euro yesterday, trimming sharp losses that came after last week’s dismal US jobs report for March. After dropping past the $1.10 per euro threshold in the wake of Friday’s employment report, but it remained weak relative to recent weeks. That is in part because of a fall in the ISM service sector purchasing managers index from February, as well as dovish talk from New York Federal Reserve president William Dudley, who called US economic growth in the first quarter “quite weak”. Dudley stressed in a speech in New Jersey that given the slowdown, the timing of any move to increase interest rates “remains uncertain because the future evolution of the economy cannot be fully anticipated.