The pound largely shrugged off the government’s lockdown extension yesterday, only dipping slightly versus the US dollar. It would appear that the announcement came as no surprise and was priced in already. There was also little market reaction when a spokesman for Prime Minister Boris Johnson stated that the government would not be asking for an extension to the Brexit transition period, in response to the head of the IMF suggesting that the UK should ask for one to quell uncertainty with economies taking a pounding in these difficult times.
It would seem that sterling is being driven by dollar strength and an uncertain euro, with some analysts now feeling quite bullish over the pound’s prospects versus the single currency. However, there remains some way to go before the full economic impact of the pandemic is felt, with the 13% contraction forecast for this year being the elephant in the room.
There are no data releases from the UK today.
GBPUSD opened at 1.2485 and dipped in afternoon trading, closing at 1.2438
GBPEUR opened at 1.1468 and showed little deviation throughout the day, closing at 1.1473
The US dollar hit a one-week high on Thursday, following the release of weekly US jobless data showing a record 22 million have sought unemployment benefits in the last month. This figure erases nearly all job gains since the Great Depression and caused a return to safe-haven assets by investors. The dollar index was up 0.4% during the day, closing at 100.03.
The worsening economic slump was also highlighted by other data yesterday that showed manufacturing activity in the mid-Atlantic region nose-diving to levels last seen in 1980 and homebuilding tumbling by the biggest margin in 36 years last month.
The euro remains on shaky ground, as the half-trillion-euro compromise deal reached between euro zone governments last week to support countries through the outbreak is widely regarded as insufficient, especially for debt-ridden members such as Italy.
The single currency lost ground to the dollar yesterday, though is remaining mostly unmoved versus sterling.
In other news, China’s economy has shrunk by 6.8% in the first quarter, the first reversal since at least 1992.
EURUSD opened at 1.0886 and closed at 1.0841
