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Pound slips as BoE hints more monetary easing may be needed

currency-newsPound slips as BoE hints more monetary easing may be needed
The pound edged lower on Wednesday in response to some dovish commentary from the Bank of England (BoE).

Sterling continues to struggle this morning, with GBP/EUR rangebound at €1.1258 and GBP/USD retreating to $1.3286. GBP/CAD is muted at C$1.7395, while GBP/AUD and GBP/NZD hold steady at AU$1.8185 and NZ$1.9702, respectively.

In the spotlight today will be the latest ISM non-manufacturing PMI. Will a strong expansion in the US service sector help the US dollar to extend its recent recovery?

What’s been happening?

The pound was on the back foot through yesterday’s session as Bank of England (BoE) Governor Andrew Bailey testified in front of Parliament’s Treasury Committee.

Bailey spoke about the ongoing uncertainty presented by the coronavirus pandemic and the possible long-term economic scarring on the UK economy, whilst also warning that more would be needed to help alleviate an unavoidable rise in unemployment.

The euro also trended lower on Wednesday as German retail sales printed below expectations in July, undermining EUR sentiment and stoking concerns over the resilience of the Eurozone’s economic recovery.

The US dollar, meanwhile, began to shed some of its recent losses through yesterday’s session as investors pounced on USD after it struck a fresh two-year low on Tuesday.

This jump in the ‘Greenback’ came as USD investors shrugged off a weaker-than-expected ADP employment report, likely because of its recent divergence from US government payroll figures.

What’s coming up?

Top of the agenda today will be the latest ISM non-manufacturing PMI from the US.

Following on from a larger-than-expected bump in the ISM manufacturing PMI on Tuesday, USD investors will be hoping for a similarly strong showing from the US services sector last month, which may help extend the US dollar’s rally from a two-year low.

In Europe, the publication of the Eurozone’s retail sales figures are likely to provide some direction for the euro. Will an underwhelming reading in July add to concerns over the bloc’s economic recovery?

Finally, GBP investors will look to today’s PMI releases for confirmation that the UK’s private sector grew at its fastest pace in almost seven years last month, although some worrying employment statistics could limit any upside in the pound.
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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