GBP/EUR touches one-week high after UK government outlines new job retention scheme

The pound ticked higher on Thursday, firming in response to the UK government announcement of a new job support scheme.

Sterling looks to be consolidating these gains this morning, with GBP/EUR steady at €1.0951 and GBP/USD edging higher at $1.2790. GBP/CAD is flat at C$1.7066, while GBP/AUD and GBP/NZD are weakening at AU$1.8059 and NZ$1.9436, respectively.

In the spotlight today will be the latest US durable goods figures. Will a sharp slowdown in order growth cap the appeal of the US dollar this afternoon?

What’s been happening?

The pound struck higher during yesterday’s session, with Sterling sentiment cheered as Chancellor Rishi Sunak unveiled how the government will protect jobs as the UK faces the prospect of another six months of coronavirus restrictions.

Announced as part of his wider ‘Winter Economy Plan’, Sunak outlined the government’s Jobs Support Scheme.

The new scheme will replace the furlough scheme which is due to expire next month and will see the government continue to top up the wages of workers who have been unable to return to the workplace full-time, hopefully helping the UK to avoid a looming unemployment crisis.

The US dollar also struck higher on Thursday, with demand for the safe-haven ‘Greenback’ continuing to grow following the development of a clear risk-off tone over the past week.

The euro, meanwhile, tumbled yesterday with concerns over Europe’s coronavirus situation as well as a weaker-than-expected German business sentiment index weighing on the single currency.

What’s coming up?

Top of the agenda today will be the publication of the latest US durable goods orders release.

Economists forecast this afternoon’s figures will reveal a notable slowing of order growth in August, potentially exerting some pressure on USD exchange rates.

However, any downside in the US dollar could be limited given that ongoing concerns over the coronavirus resurgence and its impact on global growth will keep the safe-haven currency firmly in demand.

In the same vein, we could see the euro remain on the back foot through today’s session as concerns over Europe’s coronavirus resurgence are likely to continue to dominate sentiment.

Meanwhile, we may see the pound look to consolidate its recent gains today, with any additional upside in the currency likely to prove limited amid speculation that tighter coronavirus restrictions in the UK are inevitable.