June Currency Forecast: Good afternoon. In today’s post I’ll take a look at how some of the major currencies performed over the last month, and what June could have in store. We have seen rising political uncertainty in the UK which has caused the Pound fall sharply throughout May, while reignited US-China trade tensions have seen investors flock to the safe-haven US Dollar. I’ll take a detailed look below at Sterling (GBP), Euro (EUR), US Dollar (USD), Australian Dollar (AUD) and the Canadian Dollar (CAD).
Pound Sterling Forecast (GBP)
The Pound suffered its worst monthly slide in over two years in May, as political turmoil in the UK weighed heavily on Sterling sentiment. This was mostly due to division within the UK’s two main political parties, particularly in the Conservatives where there were growing calls for Theresa May to step down as PM. Eventually, and in the face of overwhelming pressure, May announced her resignation on 24 May.
While this provided a brief boost for the Pound as it ended weeks of speculation over her future as PM it failed to last, with Sterling striking a four-month low in the final week of May on fears that a hardline Brexiteer will become the next PM and increase the risk of a no-deal Brexit.
Looking ahead, this political uncertainty is likely to continue to shape the Pound throughout June as the Tory leadership contest officially begins. GBP investors are also likely to pay close attention to the Bank of England’s upcoming rate decision as they look to see if signs that global growth will result in a more dovish outlook from the bank this month.
Euro Forecast (EUR)
Trade in the Euro was mixed last month, with the single currency facing pressure from some weak data and political uncertainty in the Eurozone, but was still able to hold its own due to the weakness of some of its peers.
In terms of data, the Euro was punished by the continued slump in Eurozone PMI readings as well as some weak industrial data out of Germany. This painted a fairly negative picture of growth in the Eurozone, something which was not helped by the European Central Bank warning of increased downside risks to the bloc due to deteriorating global trade conditions.
On the political front EUR investors were concerned by a surge of support for Eurosceptic parties in the European parliamentary elections, and concerns this could hinder further Eurozone integration. In the month to come, the focus will likely remain on any data coming from the Eurozone as economists forecast a sustained slowdown in the bloc could cause the ECB to push the boat out even further on its next rate hike.
US Dollar Forecast (USD)
The US Dollar enjoyed considerable support throughout May as demand for the safe-haven currency surged following a sudden reigniting of US-China trade tensions.
USD exchange rates touched new recent highs last month after the US hiked tariffs on $200bn worth of Chinese goods to 25% and effectively banned Chinese telecoms giant Huawei from dealing with US companies. On top of this the appeal of the ‘Greenback’ was bolstered by some solid US economic data as US payrolls and inflation both impressed at the start of the second quarter.
So far in June the US Dollar has seen its fortunes begin to reverse on growing speculation that the Federal Reserve may cut interest rates later this year – something that will likely put a lot of focus on the Fed’s policy decision later in the month.
Australian Dollar Forecast (AUD)
The Australian Dollar was hit by volatility last month, mostly as a consequence of the risk-sensitive currency being slammed by renewed global trade tensions. Propelling the currency lower through mid-May was a run of weak domestic data, which analysts speculated would make a rate cut from the Reserve Bank of Australia in June almost inevitable.
However AUD exchange rates were able to spring back from multi-month lows towards the end of the month, part in thanks to surging iron ore, as prices for Australia’s single largest export struck a five-year high.
Despite the RBA kicking off June by cutting interest rates to a new historic low, the Australian Dollar has shown remarkable resilience so far this month. But as the US opens a new trade dispute with Mexico we could we see a slump in risk appetite undermine AUD exchange rates once again.
Canadian Dollar Forecast (CAD)
The Canadian Dollar traded in a relatively narrow range last month, with the currency struggling to find momentum in the face of rising trade uncertainty. However, at the same time the ’Loonie’ was prevented from giving up any ground thanks to a particularly strong employment report despite slumping oil prices.
Looking ahead, the Canadian Dollar is likely to face some notable headwinds this month as a consequence oil prices slipping further as well as fears that the US trade tariffs on Mexico could also hurt Canada, seeing as the three countries participation in the USMCA trade pact together.
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