- Pound (GBP) traded higher as Boris Johnson expected to reduce two meter rule.
- Chancellor could also cut VAT
- Safe haven US Dollar (USD) lower despite second wave fears dragging riskier assets, such as stocks lower
- Pound US Dollar exchange rate targets $1.24
The Pound is rebounding against the US Dollar afters selling off sharply across the previous week. The Pound US Dollar exchange rate dived -1.5% last week, adding to losses of -1% the week before that. The pair settled on Friday at US$1.2358 amid fears of slowing support from the Bank of England as concerns of a second wave of coronavirus increased.
At 06:15 UTC, GBP/USD trades at US$1.2390 near daily highs amid mildly positive headlines surrounding covid-19.
Boris Johnson is expected to announce on Tuesday that the two-meter social distancing rule will be reduced to 1 meter, in a bid to help the reopening of the UK economy. Relaxing the social distancing rule should help shops, bars and restaurants as they start opening their doors and trading again.
Chancellor Rishi Sunak is also expected to announce a reduction in VAT to boost spending. The news s helping to lift sterling after insufficient support from the BoE dragged on demand for the Pound last week.
Whilst the central bank increased its bond buying programme, as expected, by £100 billion, it also hinted that it will slow its rate of purchases, which weighed on the Pound.
Investors will now look ahead to Confederation of British Industry industrial trends report ahead of the closely watched PMI readings tomorrow.
The US Dollar is slipping lower at the start of the week, despite renewed concerns over a second wave of coronavirus infections weighing on investor sentiment. Riskier assets, such as stocks were broadly out of favour, although low volumes suggest a lack of conviction. Meanwhile rising fears usually lift the safe have dollar.
The US Dollar is setting aside fears of a rising number of coronavirus cases. California recorded a record number of new cases whilst Florida also saw an above weekly average jump in infection. The recent outbreak in Beijing, however, has started to fade.
On the economic calendar, second tier data in the form of existing homes sales could attract some attention ahead of PMI numbers tomorrow.
