RedFX: GBP weaker, USD retains volatility & we have a new referral program!
GBP: Has weakened sharply since Thursday last week, when GBP/EUR was pushing 1.1450. After heavy selling on Friday, and increased pressure after data this morning - GBP/EUR is closing in on 1.1150. The below Reuters article shows the extent of damage to UK employment, and this is alongside the government support measures which now accounts for the wages of just under 1 quarter of the UK workforce.
GBP weakness now has a momentum behind it, compounded by rising speculation about negative interest rates. Silvana Tenreyro, an external member of the Bank of England's Monetary Policy Committee seems ready to adopt the policy and said it was successful in the eurozone. Her comments join those of Andy Haldane, Chief Economist at the BOE. With 2 people close to the Bank of Englnd making these comments public, markets are losing interest in buying GBP.
UK: Jobless claims jump to levels not seen since 1996, alongside the highest ever one-month jump - https://uk.reuters.com/article/uk-health-coronavirus-britain-economy/uk-jobless-claims-jump-to-highest-since-1996-as-covid-hits-idUKKBN22V0NK
As mentioned before, Brexit is starting to hit the headlines again, with anecdotal stories saying that negotiations are event trickier because they are not happening face-to-face. Nonetheless, the UK published it’s post-Breixt tariff programme today, outlined in the link below:
UK: Announces a post-Brexit global tariff regime sees tariffs removed on £ 30 billion worth of imports - https://www.reuters.com/article/us-britain-eu/uk-announces-new-post-brexit-global-tariff-regime-idUSKBN22V0LK?il=0
USD: Weaker through this morning’s session, with GBP/USD climbing 100 points to 1.2250 and EUR/USD pushing well through 1.0900 to regain 1.0950. USD weakness is due to Fed Chair Powells speech this afternoon (it is a prepared speech, the content has been released) in which he pledged to keep rates low until the US returns to full employment and his tone was more optimistic than in an interview over the weekend – he is “committed to using our full range of tools to support the economy”. All eyes on Treasury Secretary Mnuchin’s comments this afternoon also.
The Federal Reserve minutes are published tomorrow evening – the discussions around what tools to use, and to what extent, will dictate the USD direction in the medium term.
Another reason for a weaker USD could be the increasing level of tension between the US and China – something which President Trump seems to keep in the spotlight. This tension is keeping a lid on any AUD rally, despite the seemingly successful moves being made to end the lockdown and re-ignite the economy. With AUD/USD stuck in a tight range around 0.6550, RBA Governor Lowe’s speech on Thursday morning will give a clearer indication of monetary policy and tools & positive data next week might pull AUD out of the range.
CAD: As the price of oil has been crushed, CAD has done the same USD/CAD has reached 1.45 after trading at 1.3250 in mid February, but CAD has pulled back some ground, now at 1.3900. The market is looking for positive news in order to buy CAD, and key inflation data tomorrow will be telling.
EUR: Inflation data out tomorrow morning will be closely watched, but the key statistics are Thursday PMIs to give an indication of activity in both the Services and Manufacturing industries.
RedFX – we are offering free consultations to existing customers to plan for the next quarter, as well as the next year. We have a suite of products to protect our clients and optimise all FX exposures.
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