Investors lose appetite for Sterling
Sterling fell to multi-week lows yesterday as investor sentiment dampened for the GBP following a record breaking slump in UK GDP.
GDP fell by -2% in the first quarter, and by -5.8% in March. Although slightly higher than market expectations, there are concerns that these figures do not show the whole picture as the UK lockdown was only implemented for one week in March. Investors are concerned that the second quarter will be far worse with the majority of it spent in lockdown.
In addition to this, a leaked document showing that the furlough job retention scheme is expected to cost the UK government billions leading to higher debt and taxes also weighed on the GBP. The document follows the government’s announcement on Tuesday in which the furlough job retention scheme was extended until the end of October.
The dollar rallied yesterday benefiting from safe-haven flow as Federal Reserve Chair Jerome Powell rebuffed speculation of negative interest rates and warned of an extended period of slow growth for the United States.
Speculations had been high that the Federal Reserve may look at implementing negative interest rates as Fed-Futures had begun pricing in the possibility. However, Powell was quick to reject the rumours stating that “the committees view on negative interest rates hasn’t changed and it wasn’t something they were looking at”.
USD – 12:30 – Initial Jobless Claims
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