The pound struck lower again on Tuesday as the announcement of new coronavirus restrictions in the UK and a dire warning from Boris Johnson spooked investors.
Sterling started poorly last week, slipping to a three-month low against the euro as GBP investors remained pessimistic on the chances of a breakthrough ahead of a month of ‘intensified’ Brexit talks.
Further weighing on Sterling sentiment were concerns over the UK’s coronavirus outbreak as a local spike in cases prompted the government to re-impose lockdown measures in Leicester city.
However, GBP rebound quickly from its worst levels, rallying on Tuesday in response to Boris Johnson’s ‘ambitious’ plans for a post-lockdown recovery, on top of a correction in currency markets at the end of the second quarter which favoured the pound.
But it proved difficult for Sterling to extend this recovery through the second half of the week, with further upside in GBP exchange rates capped by renewed Brexit uncertainty.
This followed the conclusion of the latest round of negotiations, with both the UK and EU warning that ‘serious differences’ remain and will need to be resolved before any kind of deal can be reached.
Looking ahead, the spotlight for GBP investors this week will be on Rishi Sunak’s summer budget statement.
The Chancellor is set to update the nation on the current state of the economy as well as announce additional stimulus measures, which could help to bolster the pound if markets believe they will aid the UK’s economic recovery.
Also continuing to influence GBP exchange rates this week will be ongoing Brexit trade talks.
Expect these to weigh on Sterling sentiment towards the end of the week if talks continue to drag on without much progress.
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)