Following Tuesday’s losses, the pound had recovered some ground by early trading yesterday, perhaps generated by what is known as a relief rally, with investors dipping their toes back into riskier waters following the oil price crash. Sterling may also have been assisted by an equity index rise on Wednesday after positive corporate updates, which tempered the mood following the sell off on Tuesday.
Furthermore, data yesterday showed that the UK’s inflation rate fell in March as oil prices declined and the pandemic escalated, but remained in line with expectations and failed to have an impact.
Looking forward, it seems almost forgotten amid the current turmoil that June remains the deadline for an extension to the 11-month Brexit transition period. Without one and should accord not be achieved during the timeframe, the UK could still walk away completely from the EU without a trade deal at the end of the year.
This morning’s flash Manufacturing and Services PMI data will be keenly eyed and may have an impact if wildly adrift of expectations.
GBPUSD opened at 1.2339 and peaked at 1.2385 mid-morning, before closing at 1.2310
GBPEUR opened at 1.1360 and had an upward trickle, closing at 1.1385
The US dollar retreated slightly from its gains made the previous day, as oil prices stabilised and a degree of risk appetite returned to the market. The dollar index rose above 100, hitting a 2-week high early in the day, but it was largely a flat session.
The House of Representatives will pass Congress’ latest coronavirus aid bill on Thursday, paving the way for nearly $500 billion more in economic relief amid the crisis.
The euro is on shaky ground after earlier data showed French business activity hitting a record low ahead of today’s video summit on tackling the economic fallout from the pandemic. Markets are cautious, given the uncertainty over how far EU governments will cooperate in financing the recovery from what is certain to be a deep recession.
EURUSD opened at 1.0861 and fell throughout the day to close at 1.0812