Pound enjoys relief rally as political uncertainty fades

Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…

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The pound has struck higher so far in May in response to fading political uncertainty and optimism over the reopening of the UK economy.

During this period, we’ve seen GBP/EUR climb from €1.14 to €1.16, whilst EUR/GBP has retreated to £0.86.

Meanwhile, GBP/USD has rallied to $1.41, while EUR/USD has risen from $1.20 to $1.21.

What’s been happening?

The pound has rallied through the first half of May, with the currency benefitting from an easing of political uncertainty and rising economic optimism as the UK reopened more of its economy.

The US dollar, meanwhile, hasexperienced notable volatility so far in May, as an abysmal payroll print contrasted soaring inflation in April and resulted in fluctuating Federal Reserve rate expectations.

At the same time, in spite of robust data, the euro has struggled to determine its own direction, with the single currency mostly moving in reaction to the US dollar over the past couple of weeks.

What do you need to look out for?

Looking ahead, the pound could face some headwinds through the second half of May as the spread of the Indian variant of the coronavirus threatens to disrupt the government’s roadmap for reopening.

The euro may continue to trend higher as we head into June, so long as Eurozone data remains robust and the EU’s vaccine rollout continues to succeed.

Meanwhile, USD investors will be keeping a close eye for any communication from the Fed which might suggest the bank needs to rethink its policy guidance in light of soaring US inflation.

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