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GBP/EUR soars past €1.20 following Sajid Javid’s shock resignation as Chancellor

currency-newsGBP/EUR soars past €1.20 following Sajid Javid’s shock resignation as Chancellor
The pound skyrocketed on Thursday, passing key levels of resistance against both the euro and US dollar in response to a shake-up at the top of UK politics.

Sterling appears to be consolidating these gains this morning, with GBP/EUR stable at €1.2048 and GBP/USD buoyed at $1.3060. GBP/CAD is flat at C$1.7301, while GBP/AUD and GBP/NZD hold steady at AU$1.9416 and NZ$2.0291 respectively.

Coming up, will the US dollar push higher this afternoon with the release of the latest US retail sales figures?

What’s been happening?

The pound roared higher yesterday in response to the sudden resignation of Sajid Javid as UK Chancellor of the Exchequer.

Javid was not expected to be a victim in Boris Johnson’s first post-Brexit cabinet reshuffle, but a reported dispute over his team of aides at the Treasury apparently forced his hand.

The resulting upswing in Sterling sentiment was driven by the expectation that Number 10 will now have greater control over the Treasury, allowing Johnson to push through more infrastructure spending by overriding concerns about borrowing.

The jump in the pound was particularly noticeable against the euro, with the GBP/EUR exchange rate pushing up by over a cent to breach €1.20 for the first time since December.

This came amid a continued decline in the single currency, with investors shying away from the euro after the European Commission warning that the Coronavirus poses a ‘key downside risk’ to the European economy as it pushed its latest forecasts.

Meanwhile, the US dollar continued to firm on Thursday, strengthened by both an upbeat US inflation reading and a rise in market risk aversion after China reported a sharp increase of new cases of the coronavirus.

What’s coming up?

On the docket for today is the publication of the latest US retail sales figures.

This could see the US dollar maintain its upward trajectory through to the end of the week if sales growth remained robust as analysts expect at the start of the year.

However, the accompanying industrial production figures could cap any upside in the US dollar amid forecasts that US factory output will have contracted for a second consecutive month in January.

In the Europe the focus will be on the publication of the Eurozone’s latest employment report, where an acceleration in employment growth in the fourth quarter of 2019 may offer some much needed relief for the euro.

Finally, in the absence of any notable UK economic data, GBP investors are likely to remain focused on the recent changes at the Treasury and how this may impact the upcoming budget.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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