IFX Market Report: Monday 29th June 2020

Sterling took a hit on Friday, losing 0.8% versus the US dollar and 0.5% against the euro - its lowest level since March 26th.

A combination of factors has left the pound as one of the worst monthly performers among major currencies in June. Brexit fears are escalating, with significant doubt among investors that a trade deal will be agreed in time. As this is ongoing and unless a breakthrough is unexpectedly achieved, the prospects for sterling look bleak in the short to medium term.

Investors are also cautious over growing fears of a second wave of coronavirus infections. With restrictions being eased, infections continue. With the reopening of pubs and restaurants announced in the UK last week, markets are waiting to ascertain the impact before pushing the pound.

There are also persistent expectations of negative interest rates in the UK, as the Bank of England debates further steps needed to support the struggling economy.

There is no economic data due for release today and it is quiet for the rest of the week. Sterling is therefore firmly on the back foot and will need some positive news from elsewhere to arrest its slide.

GBPUSD opened at 1.2407, closing at 1.2351

GBPEUR opened at 1.1053, closing at 1.0994

The US dollar moved in tight ranges on Friday, with increasing caution in the markets over a second wave of Covid infections keeping risk appetite dampened. Florida and Texas are heading the resurgence in new cases, with both states on Friday ordering bars to again close down and imposing tighter restrictions on restaurants.

There was little reaction to data showing US consumer spending, which accounts for more than two-thirds of economic activity, jumped 8.2% last month - the largest increase since tracking began in 1959.

Markets this week will be looking to non-farm employment data on Wednesday and Thursday.

The euro took advantage of sterling’s travails on Friday to post its highest trading level since March 26th.

With no major activity this week, Brexit will continue to dominate.

EURUSD opened at 1.1231, closing at 1.1234

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