Sterling drops to lowest levels since mid March
Sterling fell to its lowest levels since mid-March against a strong Euro yesterday, but rallied close to 0.4% against a weaker USD as global risk appetite improved.
Despite posting a record rise, sterling was unmoved as UK PMI survey’s showed activity in the services and manufacturing sector rose to 47.6 in June, from 30 in May, beating expectations of a 42 reading. A reading under 50 represents a contraction, which is the likely reason sterling was relatively unmoved following the data release. Survey respondents also stated that the easing of lockdown restrictions had a favourable impact on economic activity, but underlying demand remained relatively subdued.
In addition, the prospects for the UK economy to post a stronger economic recovery became more likely yesterday as Boris Johnson announced further plans to ease lockdown measures. From the 4th of July the UK will replace the two metre social distancing rule with one metre social distancing to allow most businesses within the hospitality and entertainment sectors to re-open.
The euro rallied yesterday following the publication of the Eurozone’s June PMI projections. The overall Eurozone, particularly Germany and France’s projections, all beat expectations showing an uplift in activity. France’s data was extremely impressive with both services and manufacturing sectors reporting unexpected growth.
The USD moved lower against a basket of currencies yesterday as the dollar faced fresh selling pressure amid signs of a global economic recovery and confirmation from US officials that the US-China trade deal is still intact.
The USD had rallied at the start of the week when White House Trade Adviser Peter Navarro said the “US-China trade pact was over”. Since then, Navarro walked back these comments stating they were “taken out of context” with US President Donald Trump confirming in a tweet that the trade deal was very much intact.
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