- Brexit talks are keeping pressure on the Pound (GBP), progress is limited
- Britons are saving money at a record rate in lockdown boosting hopes of a strong rebound in spending
- Eurozone & UK service sector PMI in focus
- At 06:15 UTC, GBP/EUR is trading -0.05% at €1.1230
The Pound is holding steady versus the Euro (EUR) in early trade on Wednesday, registering mild losses after jumping higher for a second straight day on Tuesday. The Pound Euro exchange rate has advanced over 1% so far this week, settling on Tuesday at €1.1235, slightly down from the two week high reached earlier in the session.
At 06:15 UTC, GBP/EUR is trading -0.05% at €1.1230 as investors look ahead to UK services sector pmi data and a slew of numbers from Europe.
Brexit is back to rattle sterling investors just as investors are trying to overcome the coronavirus hit. Trade talks have so far progressed in fits and bursts. Talks have started again this week, however if no progress is made then the Pound could find itself under pressure. The UK could be looking at an even more drawn out recession if there is no trade deal agreed for the end of this year.
On a positive note, a report that Britons were saving money at a record rate helped to lift the Pound in the previous session. The report fuelled hopes that spending will rebound strongly after lockdown and help ignite a strong economic recovery. Net consumer credit fell by a record £7.4 billion in April. Meanwhile household deposits increased sharply in April by £16.5 billion, well above the standard £5 billion per month. This means that households should be in a strong position to start spending when shops reopen re-open later month.
Today investors will continue to monitor Brexit headlines. Additionally, the service sector reading for May will be closely eyed. Analysts are expecting to it remain close to the initial reading, just ticking mildly higher but still in deep contraction at 28, up from 27.8.
The Euro could be in for a volatile session amid a barrage of data releases including the unemployment rate in Germany and the Eurozone as well as final service sector PMI data. Unemployment rates are expected to rise across the Eurozone as a result of the coronavirus lockdown. However, the headline numbers are not expected to climb as high as US due to a range of government programmes that pay companies to keep staff employed.
Looking ahead tomorrow’s European Central Bank meeting will be watched closely as investors hope for an increase I the Pandemic Emergency Purchase Programme.
