The British pound is higher against the euro on Tuesday.
- Fed Chair Jerome Powell testifies to Senate Banking committee
- German ZEW data shows investor confidence rising
- Record monthly US retail sales blow through expectations (+17.7%)
GBP/EUR was higher by 56 pips (+0.50%) to 1.1184 as of 3pm GMT.
The currency pair failed in another early move below 1.11 and eventually pushed up to above 1.12 before pulling back.
GBP: Pound rebounds as Fed increases stimulus
The general rebound in risk sentiment was responsible for the bulk of the gains in the pound on Tuesday with a dearth of UK economic or political developments since yesterday’s EU/UK high level talks.
The main event of the day was Fed Chair Jerome Powell testifying to the Senate Banking Committee as part of his semi-annual Humphrey Hawkins testimony. We’ve heard a lot from Powell in the last week so there wasn’t too much room for surprise.
The rebound across markets happened before his appearance when late yesterday the Fed announced it would start buying individual corporate bonds as part of its ‘Secondary Market Corporate Credit Facility’ (SMCCF). The program worth $250 billion was a key catalyst in stock markets bottoming when it was announced on March 23.
EUR: German ZEW expectations rise
More record economic data from the United States was another reason the pound gained over the euro, which tends to act as the main counterpoint to US dollar strength.
US May advance retail sales gained +17.7% versus +8.4% expected. In April it was -16.4% (revised to -14.7%). The gains were exaggerated by a rebound in petrol prices but sales ‘Ex autos and gas’ were also +12.4% vs. +5.5% expected. ‘Food services and drinking places’ i.e. bars and restaurants were the standout sector losers, seeing bigger declines in May than April.
In the Eurozone economic data was also implying a brighter outlook. The Germany ZEW current remains stubbornly planted at record low levels at -83.1 vs. -82.0 expected, but future expectations rose to +63.4 versus the +60.0 expected. ZEW commented that there is growing confidence that the economy will bottom out by the summer.
