• GBP dropped sharply on Monday amid further BoE support for negative rates
  • 150,000 jobless claims expected (financial crisis peak 136,000)
  • France & Germany agree €500 billion reconstruction fund
  • At 06:30 UTC, GBP/EUR trading +0.1% at €1.1184 > Real time exchange rates

The Pound is advancing in early trading on Tuesday after dropping off session highs on Monday to end the session flat. The Pound Euro exchange rate settled on Monday at €1.1174, after dropping from €1.1243 on growing support at the Bank of England for negative rates.

At 06:30 UTC, GBP/EUR is trading +0.1% at €1.1184 as investors look ahead to the release of UK labour market data and ZEW German investors sentiment data.

The Pound dropped sharply in the previous session as monetary policy maker Silvana Tenreyo talked up the benefits of negative interest rates. Her comments come following those of Chief Economist Andy Haldane, who also showed he was open to considering negative rates. Together, their comments have fuelled expectations that Britain could one day take interest rates into negative territory.

Central banks else where have used negative rates as a policy tool with mixed results. The aim of negative rate being to discourage banks from holding excess cash in order to boost lending, encourage business investment and consumer spending.

Today investors will look ahead to the release of the UK labour report. Analysts are expecting the April’s jobless claims figure to surge by 150,000, after last week’s inconsequential 12,000. To put this into context the number of claims at the high of the financial crisis was 136,000. The unemployment rate for March is also expected to tick higher to 4.4%. These figures are significantly stronger than those coning out of the US thanks to the British government’s job retention scheme. When the scheme ends the data will paint a truer picture of the labour market

Euro investors will also be keeping a close eye on the economic calendar with the release of ZEW German investor sentiment data. Analysts are expecting economic sentiment to show signs of picking up in Germany as the economy starts o slowly reopen. Economic sentiment is expected to advance to 33 in May, up from 28.2.

More broadly, sentiment in the Eurozone is expected to decline to -12.1 down from 25.2. Highlighting the long road ahead to recovery.

The Euro rebounded towards the end of the previous session after Germany and France agreed on a €500 billion reconstruction fund, a European wide response to the coronavirus pandemic. Reports also indicated that plans to reopen European travel was afoot. Spanish transport minister said he expected tourism to start at the end of June.

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