- Pound (GBP) buoyed by hopes that a Brexit deal can still be achieved
- Concerns linger over reopening the UK economy too quickly
- US Dollar (USD) support by risk off tone on rising covid numbers and US/EU trade spat
- Pound US Dollar exchange rate (GBP/USD) holds above US$1.24
The Pound remains under pressure after tumbling lower in the previous session. The Pound US Dollar exchange rate settled on Wednesday -0.75% at US$1.2420 in a strong risk off session, as fears over increasing covid-19 cases and the outbreak’s impact on the global economy dragged on risk sentiment.
At 06:15 UTC, GBP/USD trades +0.05% at US$1.2416 as US Dollar strength offsets Brexit optimism.
Brexit is offering a rare show of support for the Pound after EU Chief negotiator Michel Barnier said the ball was in the UK’s court. He said the UK needed to provide a clear signal that it wanted to a make a deal. However, Michel Barnier also added that there is still times to agree a deal by the end of the deal. This is keeping the Pound buoyed as fears had been growing that there was insufficient time to get a deal done, particularly given the covid-19 delay,
The Pound fell in the previous session on warnings from scientists that the UK was easing lockdown restrictions too quickly, making a second wave of coronavirus almost inevitable. Boris Johnson’s decision to reduce the two-meter rule, down to one has been drawing criticism.
Looking ahead investors will focus on Confederation British Industry retail and wholesale data, which is only expected to show a frustratingly slow improvement to -34 in June, up from -50.
The US Dollar is in favour as risk off continues to dominate amid a growing number of coronavirus cases and as the US threatens to levy tariffs on $3.1 billion worth of EU/UK goods.
Investors will look ahead to the release of a barge of US data including jobless claims, GDP and durable goods orders.
Analysts are expecting initial jobless claims to increase by 1.3 million, only very slightly lower than last week’s 1.5 million. More than three months into the covid-19 crisis and millions of Americans are still unemployed. This will mark the 11th straight week of deceleration. Whilst 45 million Americans have filed for unemployment benefits over the past 13 weeks.
