Pound could stumble after growth data
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The pound put on a mixed performance last week
While the Bank of England’s (BoE) decision to positively revise the UK’s growth forecasts gave Sterling a boost, the currency was pressured lower after Chancellor Rishi Sunak signalled that there wouldn’t be an extension to the government’s furlough scheme.
The euro also fluctuated over the course of last week, with upbeat PMI and retails sales reports for the Eurozone counteracted by concerning GDP data and a rebound in the US dollar.
The US dollar pushed higher, meanwhile, as rising US-China tensions and fears for the US economic outlook increased demand for safe-haven currencies.
Pound undermined by furlough announcement
The pound advanced towards the end of last week in the wake of the Bank of England’s (BoE) latest interest rate decision, with Sterling hitting new highs against the US dollar.
Sterling marched higher after the BoE positively revised its UK growth forecasts. The central bank had previously estimated that the UK economy would contract by 14% in 2020.
However, as a result of the action taken by the government, the BoE has adjusted this projection to a 9.5% contraction.
The central bank left policy unchanged, as expected, and indicated that it has no plans to alter its approach for the moment.
When asked about negative interest rates BoE Governor Andrew Bailey commented that they ‘are part of our toolbox… but at the moment we don’t plan to use them.’
The GBP/EUR exchange rate recovered previous losses after the rate decision, while GBP/USD rallied all the way to $1.31.
However, the pound gave up its BoE-inspired gains after Chancellor Rishi Sunak indicated that there would be no extension to the furlough scheme, giving rise to concerns that UK unemployment could spike in October.
This week the biggest movers of GBP exchange rates are likely to be the UK’s GDP estimate and employment report.
Economists have forecast that the economy contracted by a whopping 20% in the second quarter. Confirmation of this could prove GBP-negative.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct
Currencies Direct is one of Europe’s leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we’ve maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering “business to business” solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.
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