Pound nosedives following BoE stimulus announcement
[vc_row][vc_column][vc_column_text]The pound came under some heavy selling pressure through last week’s session, with demand for the UK currency collapsing in the wake of the Bank of England’s latest stimulus announcement.
At the same time, the US dollar made steady progress last week as growing fears of a coronavirus resurgence prompted investors to favour the safe-haven currency.
Sterling, meanwhile, is showing more resilience so far this week, with GBP/EUR holding steady at €1.1036, and GBP/USD climbing to US$1.2452.
Looking to the week ahead, investors will be keeping a close eye on coronavirus developments with one eye on the easing of more lockdown restrictions and the other on the potential for flare ups in new cases.
Pound plunges on BoE stimulus decision
The pound fell sharply against the majority of its peers last week as investors reacted poorly to the Bank of England’s (BoE) latest policy decision.
The BoE announced it would be expanding its quantitative easing programme by £100bn, but simultaneously slow the pace of its bond purchases.
This prompted GBP exchange rates to plummet amid speculation the BoE will come under pressure to do more, given the myriad of challenges still facing the UK economy, and that this ‘will fuel discussion of negative interest rates’.
However, the Sterling sell-off was mostly in the latter half of the session, with the pound actually finding some support at the start of the week thanks to some fresh Brexit optimism from Boris Johnson.
Following a phone call with European Commission President, Ursula von der Leyen, the PM expressed his hopes that a deal will be reached by the end of the year, even claiming that with a ‘bit of oomph’ an agreement could be in place in July.
Looking ahead, movement in the pound this week is likely to depend on the UK government’s announcement regarding a further easing of lockdown measures.
Johnson announced that hospitality sector, cinemas, museums, and galleries will be allowed to reopen from 4 July, whilst also relaxing the 2m distancing rule to 1m.
This may trigger a jump in Sterling if GBP investors are optimistic on the chances of this fuelling a notable recovery in the UK economy at the start of the third quarter.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct
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