Daily Currency Update
GBP - British PoundJohnson has officially announced his plans to offset a second wave of COVID-19. He has stated that from Monday, gatherings of more than 6 people will be illegal in social settings. He expressed that work and school must continue as normally as possible, in his attempt to keep the economy breathing. In Brexit related news, senior EU lawyers have called to meet ministers of the UK in an attempt to understand why Johnson expressed intentions to breach the Withdrawal Agreement by overriding parts of the Northern Ireland protocol. GBP has been negatively affected by the roadblocks in Brexit negotiations so far, however found support in Johnson's speech and is once again trading above the $1.30 handle against the US Dollar. The Irish backstop situation was one of the trickiest to resolve in the last round of negotiations and therefore the market has seen this rhetoric as a major setback for UK-EU negotiations.Nancy Pelosi has spoken on the NI issue and stated that as an Irish-American, Biden has not taken well to word of reneging on the Good Friday accord, and stated that there is simply no chance that a UK-US trade deal would go ahead if Biden were to win November's presidential election, at least not if Johnson doesn't honour the deal.
Key Movers
It is expected that this afternoon's ECB meeting will carry with it a dovish tone from ECB president, Christine Lagarde. Europe is faced with a second wave of COVID-19, the break down in Brexit talks, a strengthening currency (making their goods more expensive on international markets), slow economic growth, large scale structural unemployment and weak inflation figures.Having said this, the ECB will likely not cut rates in the short term and hold the monetary policy option as a backup in the medium term in case the continent is required to once again fully lockdown. Ideally for Lagarde, Q3 will bring with it a spread of better data, which will restore some confidence into the bloc. A 10 basis point cut has already been priced into the market for 2021, however this may not be needed. We may see some Euro weakness this afternoon as Lagarde lays all this out in her economic forecast.We also see the release of monthly US PPI and Unemployment claims.
Expected Ranges
- GBP/USD: 1.29 - 1.3075 ▲
- GBP/EUR: 1.0910 - 1.1130 ▼
- GBP/CAD: 1.7030 - 1.7240 ▼
- GBP/AUD: 1.7775 - 1.7990 ▼