GBP/USD rockets to two-week high as UK prepares to reopen
Philip McHugh May 27th 2020 - 2 minute read
The pound shot higher on Tuesday, bolstered by hopes that the reopening of non-essential shops next month will help to kick-start the UK economy.
Sterling appears to be consolidating these gains this morning, with GBP/EUR flat at €1.1236 and GBP/USD stable at $1.2317. GBP/CAD is rangebound at C$1.6967, while GBP/AUD and GBP/NZD hold steady at AU$1.8531 and NZ$1.9871 respectively.
Coming up, GBP investors will be keeping a close eye on UK coronavirus statistics, as a resurgence in cases could derail the government’s plans to ease the lockdown.
What’s been happening?
The pound surged through yesterday’s session as UK markets reopened after the bank holiday weekend to the news that the UK government will allow retailers to reopen from 15 June.
This bolstered hopes that the economy will begin to show signs of life again next month and limit the extent of the UK’s inevitable recession in the first half of 2020.
Further bolstering the appeal of Sterling were unconfirmed reports that the EU is ready to make a concession on fisheries with the UK, buoying hopes for a Brexit breakthrough.
The euro ticked lower on Tuesday, with the single currency unable to hold ground against its stronger peers following another negative consumer confidence reading from Germany.
The US dollar suffered an even more notable sell-off yesterday as the appeal of the safe-haven currency was dampened by hopes for a coronavirus vaccine after US pharmaceutical firm Novavax announced it is starting human trials for a candidate drug.
What’s coming up?
Looking ahead, the pound is likely to prove sensitive to UK coronavirus developments through the remainder of this week's session as the reopening of the economy remains dependent on cases continuing to fall.
This could see Sterling pressed if new cases or the ‘R’ number –the rate at which the virus replicates – show any sign of rising.
In Europe, the focus will be on a speech by European Central Bank (ECB) President Christine Lagarde as EUR investors look for any hints on the bank’s future monetary policy.
Finally, the US dollar may be positioned to bounce back today should tensions between the US and China continue to escalate, driving demand for the safe-haven currency.