The pound rocketed on Wednesday, striking a new six-week high against the US dollar amidst renewed hopes for a UK-EU Brexit trade deal.
Sterling continues to trend lower so far this morning, with GBP/EUR slipping to €1.0857 and GBP/USD dropping to $1.2694. GBP/CAD and GBP/NZD are holding steady at C$1.6931 and NZ$1.9237, while GBP/AUD is buoyed at AU$1.7819.
Looking ahead, all eyes will be on today’s Eurozone PMI releases. Will they indicate that the bloc’s economic recovery lost more momentum this month?
What’s been happening?The pound was on the back foot through yesterday’s session as Boris Johnson announced new coronavirus restrictions for England.
While the new restrictions didn’t go as far as markets had feared, the PM’s warning that the measures would need to remain in place for up to six months put pressure on GBP exchange rates amidst fears it could see the UK’s current recession extend into the spring.
However, these losses were trimmed somewhat by comments from Bank of England (BoE) Governor Andrew Bailey as he sought to downplay the chances of the bank deploying negative interest rates anytime in the immediate future.
The euro also struggled on Tuesday as concerns over Europe’s ‘very serious’ coronavirus resurgence and the imposing of fresh restrictions in a number of countries in the Eurozone weighed on the single currency.
The US dollar, meanwhile, struck higher yesterday as Federal Reserve Chair Jerome Powell struck an optimistic tone as he testified before US Congress.
What’s coming up?In the spotlight today will be the latest PMI figures from the Eurozone.
August’s release highlighted a stark slowing of economic activity in the bloc from a peak in July.
This has fuelled concerns that the Eurozone’s economic recovery has already started to stall and could see the euro come under some considerable pressure this morning if September’s preliminary figures indicate activity began to contract again.
For GBP investors the focus will be on the UK’s own PMI release. Economists are forecasting a fairly healthy expansion in the private sector this month, but there is plenty of downside risk to the pound should these figures undershoot expectations.
Meanwhile, the US dollar looks poised to extend its recent gains as ongoing coronavirus concerns see investors continue to favour the safe-haven currency.
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)