The Pound is holding its strength against the US Dollar and the Euro, which slumped after initially spiking on relief that Marine Le Pen hadn’t won the French election. The Pound’s strength wasn’t increased by the British Retail Consortium (BRC) release. Although April showed an increase in retail sales, the release warned that British shoppers are spending less. Analysts don’t expect the Pound’s rally to last, predicting that it may drop in the second half of the year.

The US Dollar is resilient against Sterling, but is performing strongly against the Swiss Franc. Today’s major US economic release is the NFIB small business optimism indicator for April. March showed a surge up to a reading of 104.7, which was a level of confidence that hadn’t been seen in over a decade.

Pound Sterling – UK Markets

The Pound is steady against the Euro at €1.18 today, increasing 0.2% in value. Sterling has been enjoying a period of gain and stability in the last month and a half, recovering from last October’s “flash crash”. However, many analysts expect that “Sterling’s moment in the sun is coming to a close,” and the currency will drop to €1.16 - €1.15 in the second half of the year.

The fall of the Pound since the Brexit referendum last year has pushed the value of exports by 15% and increased business for many export companies. Additionally, the Bank of England predicted that the export growth will surpass domestic spending this year, which is shrinking due to inflation.

However, many export companies foresee that the boosting period won’t last for long. They are afraid that in the long term, exporting goods will become more difficult. “My honest view is that the government is slightly delusional if it senses there is a great opportunity for companies with the current value of Sterling”, Gordon Macrae, a senior manager of a leading building export company, commented. According to him, exporting is built on a stable relationship with the customer, and moving prices up or down, in a short period of time, doesn’t help.

Sterling is struggling against the US Dollar, despite this morning’s news of an increase in sales in the UK retail sector in April. The Pound is down 0.3% from yesterday, trading at $1.29. According to KPMG and the British Retail Consortium report, the retail sales in the UK reached the highest level since April 2011, the last time when Easter had fallen in that month. However, the report underlined that this success is unlikely to last, due to the rising prices and shrinking consumer spending.

US Dollar – US Markets

The US Dollar is resilient against the three major European currencies (Euro, Sterling and Swiss Franc), and reached its highest levels since 18 April against the Swiss Franc, trading at 0.99 CHF. The currency bounced back against the Pound and the Euro, after early morning lows, currently trading at £0.77 and €0.91.

Many experts believe that the US Dollar is entering a period of strength and stability, supported by the expectations that the Federal Reserve will increase interest rates in June. Additionally, the US Dollar is gaining value due to the latest crisis in the so-called “commodity block currencies”—currencies that belong to countries whose economies are strongly correlated with the price fluctuations of a certain commodity—like the New Zealand and Australian Dollar, the Brazilian Real and the South African Rand. Their value depends mainly on the prices of stocks such as oil, iron ore and copper, and the recent drop in the prices has weakened these currencies.

Euro – European Markets

The Euro remained stable against the US Dollar at $1.09, after losing the $1.10 mark, yesterday. Traders followed the “buy the rumour, sell the fact” tactic, profiting from the Euro’s rally upwards just before Emmanuel Macron was elected as the new president of France.

Another factor that kept the single currency’s value from rising was the data concerning Germany’s imports and exports. Germany recorded a surplus of €7bn in importing and exporting goods with the EU member states. ING’s report suggests that “with only a third of German exports going to other Eurozone countries, it’s obvious who has been a major beneficiary of the weak euro.”

Angela Merkel tried to defend the country’s trade surplus saying that its existence is linked to the quality of the German products, adding that the ECB is an independent authority which can’t be influenced.

Other Currencies – Highlights

Sterling continued its rally against the Australian Dollar trading at 1.76 AUD. The Aussie was hurt by the release of weak retail sales data. Analysts said that the retail sales figures will add to the concerns about the household sector. The Federal Budget will be released today amid fears that it will include a new transaction tax on interbank funding, which the banks will pass on to their customers.

The Pound to New Zealand Dollar exchange rate increased slightly at 1.87 NZD. The Kiwi increased its value against the Euro, the US and the Australian Dollar and the Yen. The reason was an International Monetary Fund (IMF) report that suggested that the New Zealand’s banking system is resilient and it could withstand a severe economic downturn.

Sterling to Swiss Franc exchange rate continued its course upwards, set at 1.29 CHF. A minor decrease of the announced unemployment rate in Switzerland didn’t help its currency, in what is considered a lower volatility pair.