IFX Market Report: Thursday 9th July 2020

There was a muted reaction yesterday to the Chancellor’s plans for the economy, with sterling holding on to its three-week highs. The pound did break the 1.26 level versus the dollar, but this was US-driven.

In an afternoon speech to parliament, Rishi Sunak announced a range of measures for the UK economy. Noteworthy inclusions were plans to pay bonuses to employers to bring workers back from the furlough scheme, a cut in VAT on spending at hotels, restaurants and tourist attractions and the subsidising of temporary discounts on eating out, to boost demand for the hard hit services sector. The Chancellor also temporarily scrapped stamp duty on home purchases of up to 500,000 pounds.

All of these measures will have an unknown impact on the economy and reaction was therefore limited, with markets still focused on the resumption of Brexit talks this week. Should a deal not be agreed, the Prime Minister stated that the UK is prepared to leave on the same terms as Australia has with the EU.

There are no economic releases today in the UK.

GBPUSD opened at 1.2529, closing around the daily high at 1.2602

GBPEUR opened at 1.1105 and closed at 1.1121

The US dollar slid to two-week lows on Wednesday, showing reduced safe-haven appeal for now as tech stocks rallied and commodity prices solidified.

The dollar index fell 0.5% to 96.479, with the NASDAQ hitting a record closing high and fuelling renewed appetite for risk, taking investment away from the greenback. However, sentiment very much remains cautious amid a resurgence of new coronavirus cases globally, particularly in the US.

The economic calendar is light Stateside today.

The euro has risen to three-week highs against the dollar, maintaining above 1.13, whilst remaining tightly range-bound versus sterling.

With little in the way of meaningful data this week, attention will remain focused on Brexit talks.

EURUSD opened at 1.1283 and closed at 1.1332

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