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Monthly wrap: Pound stumbles amid coronavirus and Brexit concerns

currency-newsMonthly wrap: Pound stumbles amid coronavirus and Brexit concerns
Key takeaways:

-              Pound retreats on Brexit and coronavirus concerns.

-              BoE stimulus announcement also takes toll on Sterling.

-              GBP Monthly lows: €1.09, $1.22, AU$1.78, NZ$1.90, C$1.67

-              GBP Monthly highs: €1.12, $1.27, AU$1.84, NZ$1.96, C$1.71

The pound fell heavily over the past month as the increasingly risk-sensitive currency was undermined by souring market sentiment.

Much of this comes as a result of growing fears of a second wave of coronavirus infections which could stifle a recovery in the global economy before it really has a chance of getting started.

Concerns over a lack of progress in Brexit negotiations added to the pressure on Sterling. While Boris Johnson has expressed his optimism that a deal will be reached, investors fear the risks of a no-deal Brexit, adding to the UK’s economic woes at the end of 2020, are growing.

The sharpest downturn in GBP exchange rates in June came on the back of the Bank of England’s (BoE) latest policy decision. The BoE expanded its stimulus programme but slowed the pace of bond purchases, prompting analysts to speculate the bank will need to take additional steps in the future.

It hasn’t been all doom and gloom for the Pound, however, with Sterling able to find some fleeting support as the UK government outlined its plans to open up more of the economy as the country emerges from lockdown.

The pound has also begun to mount a comeback so far in July, with renewed optimism at the start of the third quarter helping Sterling to rally from its worst levels.

Looking ahead, it's safe to assume that coronavirus and Brexit developments will continue to act as key catalysts of movement in GBP exchange rates over the next month.

In terms of Brexit, this could prove particularly damaging to the pound if, at the end of July after a month of ‘intensive’ talks, the UK and EU have been unable to reach a breakthrough.

Meanwhile, GBP investors will be keeping a close eye on the UK’s coronavirus statistics as more flare-ups could result in more localised lockdowns.

On the data front, Sterling could face some headwinds in mid-July should the UK’s latest jobs figures report a spike in unemployment in May.

Also in focus will be the BoE’s latest monetary policy decision. Will the pound be sent even lower if the bank hints more stimulus could be on the way?
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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