20/05/2020

Safe haven currencies fall


GBP

The pound rebounded against the US Dollar and Euro on Tuesday to move away from 7 week lows. Positive signs from a coronavirus antibody trial saw safe haven currencies such as the dollar fall as markets rallied. Sterling did not rally as much as it still remains held down by Brexit-related risks and speculation over negative interest rates.

The market has started to price in the possibility of a negative interest rates after a Bank of England rate setter Silvana Tenreyro said on Monday that the central bank has not ruled out a negative rate cut. This added to speculation after the bank’s chief economist, Andy Haldane, said negative rates were being looked at more urgently. A negative rate cut is being looked at but analyst are predicting the central bank will add to its quantitative easing program to stimulate growth.

Furthermore the pound is also being weighed down by the lack of talks in regards to a trade deal between the UK and EU. Britain are expected to set out plans for a post Brexit tariff sometime this week.

EUR

The Euro continued to strengthen on Tuesday after the Franco-Germany proposal was unveiled this week. This is a proposed fund by the European Union that will help eurozone economies that have been hit hardest by the coronavirus pandemic. The Euro was also boosted by the Dollar weakening which lost its safe haven appeal after encouraging results from the trial of a vaccine for COVID-19 boosted riskier assets.

The Euro continued to strengthen on Tuesday after the Franco-Germany proposal was unveiled this week. This is a proposed fund by the European Union that will help eurozone economies that have been hit hardest by the coronavirus pandemic. The Euro was also boosted by the Dollar weakening which lost its safe haven appeal after encouraging results from the trial of a vaccine for COVID-19 boosted riskier assets.

Key announcements

07:00 – GBP – CPI Y/Y- Expected to fall to 1% from previous 1.5%
14:00 – BOE Governor Bailey Speech
09:00 – EUR – ZEW economic sentiment (May) Germany
19:00 – USD – FOMC Minutes


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