The pound had another quiet trading day on Wednesday, as the UK showed no signs of easing its lockdown policy whilst some other European countries set out plans to re-open their economies. The government stated that it is too early to talk of easing the restrictions and that it will not review social distancing guidelines until May 7, leading investors to speculate that the lockdown will continue until at least the second half of the month.
The impasse does present downside risks for sterling, coupled with the ongoing lack of progress in Brexit negotiations. Brussels officials have said that the talks have reached a stalemate, however, Foreign Secretary Dominic Raab yesterday reiterated that the UK would not be seeking an extension to the December deadline.
Next week sees the Bank of England tackle the daunting task of putting figures to the scale of the pandemic recession, when it must also decide whether to expand its already massive 645 billion pound bond-buying programme.
There is no economic data due out for the UK today.
GBPUSD opened at 1.2441 and dipped briefly below the 1.24 level, before closing at 1.2448
GBPEUR opened at 1.1451 and was little changed, closing at 1.1462
In the US yesterday, the Federal Reserve left interest rates unchanged and repeated a commitment to do whatever it takes to shore up the economy. The dollar index fell 0.32% to 99.544, but held above a two-week low of 99.44 reached on Tuesday.
Earlier on Wednesday, data showed that the US economy contracted in the first quarter of 2020. The Department of Commerce said GDP dropped at a 4.8% annualized rate in the January-to-March period after expanding at a 2.1% rate in the final three months of 2019.
However, dollar reaction to the day’s events was muted and there was little movement.
In the eurozone, the European Central Bank meets later today and policymakers are expected to expand debt purchases to include junk bonds and take other measures to ease conditions in credit markets. This comes after German officials yesterday warned that the country will suffer its biggest slump in history this year, with GDP expected to shrink by a record 6.3%.
Meanwhile, Greece, France, Spain, Portugal and Italy have all set out tentative plans to ease lockdown measures in the past few days, offering some hope to battered markets.
EURUSD opened at 1.0864 and closed at 1.0861
In other news the Australian dollar, seen as a proxy for global growth, jumped 0.83% versus the US dollar.