The pound had a bad end to last week, with the Bank of England on Thursday and a public debt figure on Friday pushing sterling to its worst level since mid-May.
In its monthly policy meeting on Thursday, the BoE voted to increase its bond buying program by another £100bn. Whilst in line with expectations, this and Brexit concerns ensured that the pound fell away in the afternoon.
Friday’s record government borrowing figure further compounded sterling’s negative position. Public debt exceeded economic output for the first time since 1963, when the UK was still repaying WWII debt and shows just how significant the cost of the pandemic has been at the start of the fiscal year.
Euro sellers should note that the pound is hovering at a 3-month low versus the single currency today, below the 1.11 level.
There was some good news on Friday, with retail sales rebounding in May more than expected. However, this was soon overshadowed by the borrowing figure.
Economically, it is a quiet week for sterling and attention will be focused on the ongoing Brexit negotiations. Both sides have agreed that an agreement needs to be reached by the Autumn.
GBPUSD opened at 1.2411, closing down at 1.2361
GBPEUR opened at 1.1215, closing at 1.1189
Fears of a second wave of coronavirus infections drove the US dollar to its best weekly gain in a month on Friday. The greenback gained 0.54% last week against a basket of currencies, its best performance since mid-May. The dollar index was up 0.18% to 97.61 in afternoon trading.
There is no fundamental data due out Stateside this week, so movement will likely be driven primarily by risk appetite.
There was little cheer in the eurozone on Friday, as EU leaders made no progress in a video-conference regarding a 750 billion-euro coronavirus recovery fund that has been a bitter bone of contention for some time. EU President, Christine Lagarde, had warned that the economy is in freefall and called for a united front, but Sweden, Denmark, Austria and the Netherlands stated that the proposed recovery fund is too big and the allocation of money would not be sufficiently linked to the pandemic crisis.
Tomorrow sees the release of both French and German Manufacturing PMI data.
EURUSD opened at 1.1215 and closed at 1.1189