Yesterday’s trading bought very little for investors and speculators to feed off and as such we saw very little market movement for sterling exchange rates across the board.
The current market certainly is one that is hard to predict as a lot of the movements we have seen of late have been down to general market sentiment rather than economic data, with the world currently in the midst of a pandemic, a global recession just around the corner and with political instability rife it is very difficult to know just what may be coming next for exchange rates so it is very much a market to have a very close eye on at all times.
In terms of economic data for the U.K we have a fairly quiet week until Friday, where a flurry of information is due to be released at 7am on Friday morning, including trade balance, industrial and manufacturing production and most importantly our GDP (Growth) figures.
Expectation on growth for April is a contraction of 18.4% which would be a huge number but not a great surprise given the lockdown was in place for the whole month, it may be a sign for May’s performance too. Should the figure come out close to 18.4% we may not see a huge amount of market movement but if the figure is worse than expectations then this might be another reason for investors and speculators to leave the pound alone and you might see sterling weakness.
A hot topic of late has been the latest round of Brexit negotiations which bought very little notable progress last week, and expectations are now that we will not have an extension requested past the 31st December deadline, a decision does need to be made before the end of June.
Comments at the end of discussions last week from both Michel Barnier and David Frost both suggested that there had been very little progress made, this poured fuel to the no deal Brexit fire, a hot topic that has led to investors and speculators being very cautious regarding the pound.
For those following the Covid-19 situation yesterday was a positive day for the U.K as figures for deaths in London and the South of England were at 0, sadly across the U.K 55 people still lost their lives, however this latest news has stepped up calls for further easing of restrictions. Boris Johnson is due to meet with his cabinet today to discuss what further action can be taken to progress the U.K forward with their exit strategy. Keep a keen eye on tonight’s press conference for any further news.
Sterling to euro exchange rates have remained stable over the past few weeks, with interbank rates remaining in the 1.10 – 1.13 range for almost a month now. Both the U.K and Eurozone have released poor economic data and a poor outlook for the future, so neither of these have had a great impact on the value of each respective currency.
One of the major market movers presently appears to be general market sentiment and progress with lockdown exit strategies up until now, albeit we have seen a slight increase in the R rate of the virus but that has not been deemed enough to be of grave concern.
It is no secret that there has been a lot of unrest around the world which has led to very large protests. A handful of the protests did seem to have a real lack of social distancing and if you mix this with the fact that lockdowns around the world are coming to an end, there are now concerns that we may now have a further spike or a second phase of Covid-19.
When we had the initial issues with the pandemic, sterling to euro interbank exchange rates dropped quite significantly, as did the pound in general.
This does suggest that should we see a second wave of the virus then those waiting to buy euros should be cautious that this coupled with the potential of a no deal Brexit still hanging over the head of the U.K may lead to a second drop in the value of the pound.
Yesterday Christine Lagarde testified to the European Parliament and although she suggested that further fiscal action would be required she also appeared confident that the issue with the German Constitutional Court would be resolvable and this countered her earlier comments and meant we didn’t see much market movement for euro exchange rates.
GBPUSD exchange rates dropped ever so slightly during yesterday’s trading, putting an end to 7 consecutive days of gains for the pound and pushing the GBPUSD exchange rate up above 1.27 which is the highest interbank level seen since the middle of March.
Tomorrow evening we have the Federal Reserve interest rate decision and press conference to be held by Jerome Powell, Chair of the Fed.
Serious rioting across the United States has led to political instability and that has started to weigh heavily on the value of the dollar.
Concerns from investors are starting to rise that just when the U.S economy may need some serious attention and could fall into a disastrous recession, there is a huge issue regarding stability and it is also difficult to know who will be taking charge and steering the U.S economy through such turbulent times as President Trump’s popularity declines day after day.
Joe Biden is now the bookies favourite to win the U.S Presidential election in 2020 which is due on November 3rd, he was vice President from 2009 to 2017 so seems a likely candidate however should he win he would also be the oldest elected president in history being 78 years old in when the polls come around.
With all the uncertainty that is hanging over the head of the U.S at present there is a little belief in the markets that the safer haven status of the dollar has temporarily subsided until matters are ironed out and everything settles down a bit, both in terms of economic performance and political stability, so it we could see dollar exchange rates drop a little further as the heat turns up on President Trump.
It is also understood that Donald Trump is considering sanctions and another attack on China, whom he still deems responsible for the Covid-19 outbreak, so be prepared for further tensions between the U.S and China which could also impact global attitude to risk.
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