Sterling lost further ground on Friday, hitting its lowest position in over a month, as the UK and European Union exchanged barbs over a post-Brexit trade deal. In early trading this morning, the pound has slipped further versus the euro to break into the 1.11s.
British Chief Negotiator David Frost and his EU counterpart, Michel Barnier, made less than positive statements, with Barnier calling the third round of talks ‘disappointing’. Investors are clearly disappointed with the lack of progress and are growing increasingly concerned that the end of year deadline draws ever closer, with the UK stating earlier on Friday that there will be no extension.
Last week saw the pound endure five consecutive days of losses and it is the worst-performing G10 currency so far this month, having fallen more than 3.7% against the US dollar alone in May. With Britain’s death toll from the virus topping 40,000, the worst reported figure in Europe, causing ongoing reticence in relaxing restrictions and the likelihood of further quantitative easing measures from the Bank of England in June, the outlook appears somewhat bleak for sterling.
It’s a fairly quiet weak for UK economic data, with Thursday’s Services PMI data the only notable release.
GBPUSD opened at 1.2207 and fell away to close at 1.2118
GBPEUR opened at 1.1286 and slid to close at 1.1214
The U.S. dollar managed to post a 0.66% net gain across last week, despite the threat of a second wave of infections rattling investors and a stream of bleak economic data. The greenback continues to benefit from low risk appetite in the current climate.
Friday’s retail sales figures showed a second straight month of record declines, adding to the historic loss of 20.5 million jobs last month. Despite this, the dollar index was up 0.13% on Friday afternoon to 100.4, as the dollar continued to attract safe-haven bets.
This week sees Fed Chair, Jerome Powell, testify before the Senate Banking, Housing, and Urban Affairs Committee. Thursday sees the release of Manufacturing PMI data.
The euro has a quiet week on the economic front until Friday, when French Services and German Manufacturing PMI data is released. Following these, the ECB is due to publish the minutes of its last policy meeting. In the meantime, the single currency continues to be influenced by external factors.
EURUSD opened at 1.0815 and closed at 1.0808