Home Daily Commentaries Too little, too late for Boris?

Too little, too late for Boris?

Daily Currency Update

GBP - British PoundRelative to the volatility we’ve seen of late, GBP had a very muted week last week as it traded in a 200 pip range against the US Dollar. There is an extreme risk off attitude at banks and institutions with the majority of positions still in safe haven/trusty positions (USD, JPY). UK decided to extend its regulated lockdown period by another 3 weeks on Friday as Raab claims that the UK could not risk the progress it had made in fighting the outbreak by easing up on restrictions at this “delicate and dangerous stage”. Despite the current caution from the government, the Sunday times released a scathing piece on Johnson yesterday, slaughtering the UK government's response to the global pandemic, claiming PM Johnson missed 5 key cobra meetings before he began to take the crisis seriously. The UK finds itself in 5th place for fatalities in the face of the global pandemic, despite our moderate population. After a string of negative data releases worldwide, it is surely the UK’s turn this week. Across Wednesday, Thursday and Friday, we have Manufacturing and Services PMI, as well as retail sales. We are yet to see much data, highlighting the full affect of coronavirus to the UK economy and therefore it will be a useful tool for the government and bank of England when devising their exit strategy. In more positive news, Oxford University are pioneering a coronavirus vaccine and hope 1 million doses are readily available for clinical trial by September. Without any testing or approval from regulatory boards, this is currently just speculation. However, if they can do so, expect a real surge in the pound and a shift in global stocks.

Key Movers

The USD remained strong in the face of a few weeks of headline grabbing unemployment data. As expected, core retail sales came in negative on Friday, however is that really a surprise in the current climate? Eating out, clothes sales and luxury goods sales were amongst the most depleted sectors, however many will take solace in the short-term nature of the virus, as china begins to return slowly to normality. The US will count their lucky stars that the overall figures only came in -4% m/m. There is no doubt that April’s figures will look far worse, however once again it is extremely important to consider to what extent negative data is recoverable short term damage and what is underlying long term structural damage. It seems Trump is trying to worsen this situation by encouraging 3 large states to protest and ‘march against’ against lockdown rules.Despite many not following the rules/guidelines in place, the US dollar found support on Monday and a rally in riskier currencies lost steam, as investors braced for more dire news on the fallout. With the infection trend still rising, investors dare not move from their safe positions. Major currencies were mostly range-bound, though the risk-sensitive Australian and New Zealand dollars and the oil-sensitive Canadian dollar fell around 0.3% since open. This week we see the release of a range of European service and manufacturing PMIs, as well as German IFO business release. Friday will also bring US employment claims and manufacturing data. The IMF released an updated growth forecast for 2020 and 2021 with Europe looking the most damaged. Germany, Spain, Italy and France are all expected to feel a 7% dip in GDP (at least) for the rest of the year.

Expected Ranges

  • GBP/USD: 1.2330 - 1.2590 ▼
  • GBP/EUR: 1.1380 - 1.1600 ▲
  • GBP/AUD: 1.9410 - 1.9680 ▼
  • GBP/CAD: 1.7420 - 1.7680 ▼