IFX Market Report: Monday 27th July 2020

Sterling begins the week strong off the back of one of its most positive weeks since Lockdown began.

On the data front – Friday’s UK PMI figures beat expectations across the board, improving from last month’s reading significantly and exceeding forecasts. UK Retail sales was also better than predicted, with June’s figure showing a positive reading for the first time since February.

GBPEUR opened at 1.0967 on Friday, with limited movement over the trading day, closed at 1.0972.

GBPUSD opened at 1.2735 Friday morning and continued to improve, finally closing at 1.2746.

Since Friday’s close we have seen GBPUSD surge, reaching its highest levels since early March, reaching a high of 1.2855 early this morning.

Could this be the first signs of an economic “bounce” back? Economists are sceptical. In regard to GBP specifically, as has been the case for the last 4+ years, Brexit negotiations pose to dictate sterling’s performance. Since talks have resumed, investors’ attention is increasingly being redirected back to the ongoing trade talks. Whatever news we get on this front will be sure to induce volatility in the pound.

The USD, in contrast, had one of its worse weeks of the year.

Commencing tomorrow and concluding Wednesday, we have the monthly FED meeting and Interest Rate decision. The consensus is that it is unlikely interest rates will be changed, however in the light of weak labour data last week and the deteriorating economic health of the US, many analysts believe that policymakers will begin laying the groundwork for changes in September or the fourth quarter.

With a plethora of important data releases from the US this week, given the above, all will be closely watched and analysed. We have July’s Consumer Confidence, PCE Price Index, Michigan Consumer Sentiment, Markit and ISM Manufacturing PMI’s and Q2’s GDP.

Across in Europe, the EUR continues its strong form coming into this week, still riding high from the announcement of the European Recovery Fund last week.

EURUSD opened Friday at 1.1606 and continued to improve throughout the trading day, closing off at 1.1614.

EUR strength over the weekend, similarly as with GBP, EUR has made more ground on the dollar – opening this morning above 1.17.

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