Pound rallies on new stimulus package
[vc_row][vc_column][vc_column_text]The pound extended its recovery into a second week last week, with the announcement of a new stimulus package aimed at protecting jobs helping to buoy Sterling sentiment.
At the same time, the euro faced a setback last week, as the European Commission slashed its growth forecast for the Eurozone and warned there are ‘exceptionally high’ downside risks, which could see the bloc’s recession become even worse than currently predicted.
Sterling, meanwhile, finds itself on the back foot again this week, with GBP/EUR sliding back to €1.10, and GBP/USD tumbling to US$1.25.
Looking to the week ahead, the spotlight will be on the euro as EU leaders meet to discuss the EU’s coronavirus recovery fund.
Pound rallies as Rishi Sunak Unveils £30bn stimulus package
The pound ticked higher again last week, bolstered by improving market sentiment and Rishi Sunak’s announcement of new stimulus measures.
Sterling initially stumbled last week, with the UK’s strongest construction PMI reading in two years failing to offset some lingering Brexit jitters.
However, GBP exchange rates were quick to bounce back, with investors turning bullish towards the pound ahead of Chancellor Rishi Sunak’s ‘summer update’.
This was the main focus for the week, with Sunak announcing stimulus measures worth £30bn directly aiming at protecting and creating jobs during the UK’s post-coronavirus recovery.
While GBP investors welcomed the new stimulus package, analysts cautioned that more needs to be done if the Chancellor is to prevent a ‘cliff edge’ of mass unemployment later in the year.
The second half of the week then saw further upside in Sterling tempered by fresh Brexit uncertainty after EU officials warned that ‘substantial differences’ remained between the UK and EU following talks in London.
Turning to this week, it looks like the pound may struggle to extend its recovery, with Sterling sentiment already being knocked by a weaker-than-expected GDP reading in May.
Adding to the pressure later in the week is the UK’s latest jobs report, with economists forecasting a jump in unemployment and slump in wage growth in May.
On top of this, GBP investors will also likely have to contend with more Brexit driven uncertainty as analysts remain pessimistic on the chances of any kind of breakthrough in this week’s negotiations.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct
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