RationalFX : Sterling was pretty flat against both the Euro and the US Dollar despite mixed news from both currencies. GBP largely held its position against the Euro despite data showing a better than expected rise in German business morale …
This news did however add to a weaker dollar as investors took some risk off currency moves which allowed sterling to also largely maintain its level through Wednesday.
The short to medium term outlook for sterling will certainly be based on whether Prime Minister Boris Johnson’s decision to reopen a large chunk of the economy does not lead to a second spike of coronavirus cases. The current uptick in confidence across the EU is also helping the case for a stronger pound as the market looks to move away from safe-havens. Sentiment is still finely balanced however and can quickly reverse if we see either an increase in coronavirus cases or negative news regarding Brexit talks.
There is growing evidence the eurozone is bouncing back. The Euro is performing well against both GBP and USD. The key question for the eurozone will be whether they can get back to pre-coronavirus levels and whether more stimulus will be needed from the ECB. Recent German data suggests the single currencies largest economy should return to growth in Q3.
Adding to uncertainty, the US are potentially looking at a fresh tranche of import tariffs on goods from both the EU and the UK with Trump ramping up his ‘America First’ mantra in the build up to November’s presidential election in the US, which could add further complications to the already anxious market over the next few months.
On top of this, global investors are fearing mass shut downs being reintroduced across America as their infections rates rising to uncomfortable levels once again. Cases are on the rise in major states such as Florida, Texas and California. New York announced quarantine measures from anyone coming in from a state that has a high number of cases.
The US economy failing to sustain its recovery is not good for global growth and will add to market anxieties and ultimately circle back to a risk-off attitude.
12:30 – US – initial jobless claims
12:30 – US – GDP data
Source : ETFWorld.co.uk