Last week proved to be yet another good week for the pound. On Thursday, the unexpectedly positive outlook given by Andrew Bailey and the Bank of England at their latest policy decision helped boost sterling, enabling cable to hit fresh 5-month highs at 1.3186. The BOE upgraded their 2020 growth forecasts and played down the chances of a rate cut anytime soon. Following this statement, a rate cut was completely priced out of the market thus uncapping sterling’s upside.
Still riding high from ‘super Thursday’, GBPUSD opened the session Friday trading at 1.3108. However, after a better than expected Non-Farm Payrolls (NFP) report from the US in the afternoon, cable depreciated, closing the day off at 1.3042.
Looking ahead to this week we have two top-tier economic releases that should dictate cable’s performance. On Tuesday we have the UK jobs report – with unemployment set to remain at 3.9%, the report is expected to convey the UK’s ‘successful’ economic response to the pandemic. Second is UK GDP for Q2, released on Wednesday – Analysts have forecasted a bounce in June to mitigate the crash already reported in April and May.
Despite the relatively upbeat outlook from the BOE on Thursday and any ‘positive’ news that may come this week, a spike in COVID-19 cases here in the UK would kill off any signs of optimism. Even though UK cases are rising, at this point flareups are remaining localized. Aberdeen is the latest destination to have restrictions imposed, joining the likes of Manchester and Leicester.
On the Brexit front, there is yet to be any substantial developments. However, given the pound's recent form, no news at this point seems to be positive. With expectations so low surrounding negotiations, any news deemed slightly positive is likely help the pounds efforts. Equally, if any bad news is released, the pound is likely to suffer.
GBPEUR once again had an uneventful session on Friday holding below the 1.11 handle. The pair opened at 1.1072, only to finish the week a fraction above at 1.1074.
Arguably the most ‘significant’ move of Friday came from EURUSD. In the last few weeks we have seen the pair test 2-year highs and surpass the 1.19 level – however on Saturday, frustrated by the deadlock in the Senate, President Trump signed executive orders partly restoring enhanced unemployment payments to over tens of millions of Americans who have lost their income as a result of the pandemic and lockdown restrictions. Although a full package is yet to be agreed, US House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin said yesterday that they are willing to resume stimulus negotiations.
What also helped boost the dollar last week was the NFP release on Friday. The US jobs reports of late have painted a gloomy picture for the US; however, Friday’s release showed an increase of 1.763M jobs – notably better than forecasted.
EURUSD opened the day strong on Friday at 1.1836. But after the NFP release and increasing rumours Trump would intervene in the support package, the pair closed the week off at 1.1776
Today is quiet on the data front, with only FED member Charles Evans giving a speech this evening being of note. Given the current situation in the senate, it may be interesting to hear what the usually dovish Evans has to say.
