GBP/USD trades narrowly as BoE warns of downside risks

The pound was left directionless on Thursday after the Bank of England (BoE) warned of downside risks to the UK’s economic recovery.

Sterling remains muted so far this morning, with GBP/EUR rangebound at €1.1001 and GBP/USD flat at $1.2950. GBP/CAD is stable at C$1.7069, while GBP/AUD and GBP/NZD hold steady at AU$1.8048 and NZ$1.9616, respectively.

Meanwhile, will some disappointing UK GDP figures put some more pressure on GBP exchange rates today?
 

What’s been happening?

The pound was subdued through yesterday’s trading session following comments from BoE Governor (BoE) Andrew Bailey.

Bailey warned that risk to the UK’s economic recovery are ‘very much on the downside’ as the country still faces ‘unprecedented uncertainty’ due to the coronavirus pandemic, which will complicate the UK’s post-Brexit transition.

The US dollar was also rangebound on Thursday in response to some weaker-than-expected US jobless claims figures, with another 840,000 claims last week stoking concerns that the recovery in the US jobs market is grinding to a halt.

The euro, meanwhile, came under pressure yesterday following the publication of the minutes from the European Central Bank’s (ECB) September policy meeting.

The minutes highlighted policymakers concerns over weak inflation in the Eurozone, and that most members were supportive of the ECB’s ‘ample stimulus’ measures.
 

What’s coming up?

Kicking off today’s session we have the publication of the UK’s latest monthly GDP release.

These revealed that the UK economy returned to growth in the three months to August, offering some support to the pound this morning despite growth in August itself undershooting expectations.

However, it remains to be seen if Sterling can maintain these gains through to the end of the session given the shadow of Brexit continues to hang over the currency.

Across the channel, in the absence of any notable Eurozone data we are likely to see EUR investors turn their attention back to Europe’s coronavirus resurgence, likely dragging on the euro if cases continue to surge at an alarming rate.

USD data releases are also looking thin on the ground today, and as a result we could see US election uncertainty infuse some volatility into the US dollar today.