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Weekly Roundup: Pound undermined by furlough announcement

currency-newsWeekly Roundup: Pound undermined by furlough announcement
The pound advanced towards the end of last week in the wake of the Bank of England’s (BoE) latest interest rate decision, with Sterling hitting new highs against the US dollar.

Sterling marched higher after the BoE positively revised its UK growth forecasts. The central bank had previously estimated that the UK economy would contract by 14% in 2020.

However, as a result of the action taken by the government, the BoE has adjusted this projection to a 9.5% contraction.

The central bank left policy unchanged, as expected, and indicated that it has no plans to alter its approach for the moment.

When asked about negative interest rates BoE Governor Andrew Bailey commented that they ‘are part of our toolbox… but at the moment we don’t plan to use them.’

The GBP/EUR exchange rate recovered previous losses after the rate decision, while GBP/USD rallied all the way to $1.31.

However, the pound gave up its BoE-inspired gains after Chancellor Rishi Sunak indicated that there would be no extension to the furlough scheme, giving rise to concerns that UK unemployment could spike in October.

This week the biggest movers of GBP exchange rates are likely to be the UK’s GDP estimate and employment report.

Economists have forecast that the economy contracted by a whopping 20% in the second quarter. Confirmation of this could prove GBP-negative.
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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