16/06/2020

Sterling lower as market sentiment shifts to risk-off


GBP

Sterling fell to two week lows against both the Euro and Dollar on Monday as market sentiment shifted to risk-off amid ongoing Brexit uncertainty and a spike in global coronavirus infections.

A fresh coronavirus outbreak in China and the US put financial markets on the back foot and has led to investors becoming nervous, although economies have started to open around the world.

Leaders from Britain and the European Union agreed that talks needed to pick up fast in order to clinch a deal. Prime Minister Boris Johnson said ‘an agreement could be reached in July with a bit of a push’. Little progress has been made so far with a deadline to extend the transition period fast approaching.

Lastly, investors will keep a close eye out for the Bank of England’s meeting on Thursday where the BoE are expected to provide further stimulus. It is reported that the central bank are willing to increase money supply by 100 billion pounds to support the British economy which has been hit hard by the coronavirus pandemic.

USD

The dollar fell on Monday after the Federal Reserve announced it would buy individual corporate bonds in the secondary market, sparking a risk-on move that sent U. stocks higher and safe-haven assets like the US Dollar lower.

The Fed said it will start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility (SMCCF), one of several emergency facilities recently launched by the US central bank to improve market functioning in the wake of the coronavirus pandemic. The central bank will use an indexing approach when making purchases, aiming to create a portfolio that is based on a broad, diversified market index of US corporate bonds.

Key announcements

7:00 – GBP – Claimant count change
1:30 – USD – Core retail sales m/m – Forecast at 5.5% from a previous -17.2%
1:30 – USD – Retail sales m/m – Forecast at 7.9% from previous -16.4%
3:00 – USD – FED chair Powell testifies


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