- Brexit remains in focus, Pound (GBP) supported as Michel Barnier pushes for extension
- UK households are saving money at a record rate in lockdown
- US ADP report expected to show 9 million fall
- At 07:15 UTC, GBP/USD is trading +0.3% at $1.2585
The Pound is powering higher for a fifth straight session on Wednesday, hitting a 5-week high overnight. The Pound US Dollar exchange rate settled on Tuesday +0.45% at US$1.2550.
At 07:15 UTC, GBP/USD is trading +0.3% at US$1.2585, having eased back from US$1.2611 reached in the Asian session amid continued US Dollar weakness.
Brexit remains a central theme for the Pound as trade negotiations continue across the week. EU Chief negotiator Michel Barnier’s push for an extension to the transition period has helped boost sterling, prompting hopes of a softer Brexit.
Overall progress in Brexit talks has been happening in fits and bursts. Little progress has been made recently. Failure to agree on a trade deal could see the UK experience an even more drawn out recession as businesses also attempt to overcome the coronavirus hit.
Showing support for the Pound, a recent report revealed that Britons have been saving money at a record rate in lockdown, fuelling hopes that this could spark a strong economic recovery when all shops re-open. Household deposits increased by £16.2 billion in April, compared to the usual £5 billion increase.
Investors will now look ahead to the release of the UK service sector PMI for May. Analysts are expecting the reading to be only a mild improvement from the preliminary reading, with the sector remaining firmly in contraction territory.
The US Dollar continued to fall overnight as risk sentiment remains elevated amid the reopening of economies and despite tensions in the US. Investors continue to rotate out of the safe haven currency in search of riskier assets.
Investors will now look ahead to the release of the ADP private payroll report, a strong lead indicator for Friday’s non-farm payroll. Private payrolls are expected to fall by 9 million in May. Analysts are not expecting much reaction following April’s 20 million fall. Even as unemployment mounts, the market’s focus is on the recovery.
