16/07/2020

Further losses for the pound


GBP

The pound posted some further losses yesterday despite the currency markets showed a bout of optimism in light of growing expectations of a Covid-19 vaccine breakthrough. Reports suggest we could have news from the Oxford Covid-19 vaccine as early as Thursday on the early positive results of recent testing.

Recent data releases show the pound is still very sensitive to economic data releases. The pound did initially claw back some loses yesterday but ultimately fell further once again by the end of the day.

Better than expected employment data for the UK gave it support, but this support was removed when the US registered another daily record in new coronavirus cases. A drop in tone for US treasury yields was still not enough for the pound to curb its fall on the greenback.

Despite the positive news around a vaccine, investors are still keeping a very close eye on developments between the US and China, any collapse in relations could swiftly undo any gains made for both euro and sterling against the dollar as investors rush back to the safe-haven currency.

White House correspondence has indicated they are willing to target Chinese companies listed on the S&P 500, a move that will undoubtedly cause major damage to the two countries already at loggerheads as President Trump ramps up his hostile rhetoric towards the Asian superpower.

With UK data being poor recently, especially the previously mentioned GDP data, the pound still seems to have limited upside, with most upward movements being drawn from weakness elsewhere. The next direction of the Bank of England is highly anticipated, further stimulus and the potential of a further interest rate cut is firmly in the back of investors’ mind.

Key announcements

11.45 – ECB interest rate decision
12.30 – US retail sales and initial jobless claims


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