The pound had a more positive day yesterday but still remains under pressure after the announcement form the Chancellor of the Exchequer Rishi Sunak to replace the furlough scheme due to expire in October with a new job support scheme aimed at bridging the pay gap in wages on employees working reduced hours.
The furlough scheme introduced at the start of the Coronavirus pandemic has saved millions of jobs in the UK but was due to expire in October, the government felt the safety net had to end at some point. But with the recent spike in new cases and reimposed lockdowns, the government came under pressure to offer either an extension to the scheme or an alternative to save jobs going into the winter.
Initially renewed hope on the talks between the UK and EU helped the pound in the morning, the two main negotiators announced they were determined to strike a deal. However, investors remained cautious about elements of the Chancellor’s announcement. Sunak conceded he would not be able to save every job, unemployment would rise and the government would only support viable jobs.
GBPUSD hit a 2-day high of $1.2781 and fell later in the session but closed up on the day at 1.2754.
GBPEUR hit a 1-week high of €1.0971 but dropped back to 1.0909 ending up roughly flat on the day.
The US dollar performed well again marking a fifth day of gains as investor remained risk averse on the back of the surging Coronavirus cases in Europe and rising US unemployment.
US initial jobless claims increased 4,000 to a seasonally adjusted 870,000 for the week ended Sept. 19, compared to 866,000 in the week before whilst economists had expected it to fall to 840,000 applications.
The dollar index, which measures the greenback against a basket of major currencies, reached 94.59 at one point its highest level since July 24.
EURUSD suffered in the morning as a result of poor European data. The pair opened at 1.1650 and fell to a 2-month low of 1.1625 before recovering in the afternoon.
