The pound trended broadly lower through June, the currency being primarily undermined by concerns over the UK’s economic trajectory.
Sterling has already seen some notable losses this morning, with GBP/EUR sliding to €1.1166 and GBP/USD tumbling to $1.3207. GBP/AUD has slumped to AU$1.8155, while GBP/CAD and GBP/NZD are muted at C$1.7315 and NZ$1.9724, respectively.
Coming up this week, we are likely to see the spotlight on the European Central Bank (ECB) as it holds its September policy meeting.
What’s been happening?The pound was on the defensive at the end of last week as markets were unnerved by dovish comments from Bank of England (BoE) policymaker Michael Saunders.
Speaking at an online webinar, Saunders warned that a large number of employees still on furlough are likely to be made redundant, and that the UK’s economic recovery could be hindered as infection rates start to rise again.
Saunders also warned that the BoE’s current Brexit forecasts may be too optimistic suggesting that ‘risks probably lie on the side of a thinner trade deal, a less-smooth transition, or more persistent Brexit-related uncertainty’.
The euro also trended lower on Friday, with the publication of weaker-than-expected German factory order figures in July stoking concerns over the trajectory of the Eurozone’s economic recovery.
The US dollar, meanwhile, closed last week on a high as the latest US payroll figures revealed a sharper-than-expected fall in the US unemployment rate last month.
What’s coming up?Acting as a key catalyst of currency movement in the coming week will be the European Central Bank’s (ECB) latest policy meeting.
While no policy changes are expected from the bank, a lowering of the ECB’s inflation forecasts could exert some pressure on EUR exchange rates.
There is also some speculation that ECB President Christine Lagarde will also seek to talk down the euro. This follows recent reports the bank is concerned the current strength of the single currency could hamper the Eurozone’s economic recovery.
For GBP investors the spotlight this week will be on the latest round of Brexit talks. Johnson is expected to announce plans to walk away from talks if a deal is not reached by mid-October, the prospect of which looks to dent the pound.
Finally, USD investors will be eagerly awaiting the return of the US Senate this week, amidst hopes that the Democrats and Republicans might finally be able to reach an agreement regarding the next round of US coronavirus stimulus.
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)