06/03/2020

Sterling boosts as rate cut fears ease


GBP

Sterling hit a weekly high against the US dollar on Thursday as the chances of an immediate interest rate cut have diminished. The pound was also boosted by constructive talks held at the first round of trade negotiations between UK and EU officials. 

The EU Chief Brexit Negotiator Michel Barnier delivered a press conference and confirmed talks had started positively. He believes the first round of talks was an ‘opportunity to exchange, compare and clarify’ respective positions. The early signs are promising and the parties have not fallen out as of yet, which will give sterling some breathing space after record losses at the end of February.

Barrier mentioned that ‘many serious differences’ still exist. Some points of contention are, unsurprisingly, the UK’s unwillingness to follow EU rules in order to maintain a level playing field. Barnier said the “UK has made it clear it does not wish to commit formally to continue to apply the European convention of human rights.” Sterling is likely to remain volatile due to ongoing trade talks between the UK and the EU and what impact the outbreak of the coronavirus may have on the British economy. 

Key Announcements

1:30 – USD: Average hourly earnings – forecast at 0.3% from previous 0.2%.
1:30 – USD: Non-farm employment change – forecast at 175k from previous 225k.
1:30 – USD: Unemployment rate – unchanged at 3.6%.


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