Lockdown restrictions weigh on the pound
Wednesday 21 October, 2020
Daily Currency UpdateJohnson has been resisting pressure for a second lockdown, fearful of the economic effects, but the resistance may not last with the UK confirming 21,331 new cases and 241 deaths on Tuesday.Britain’s government borrowing exceeded forecast in September, official data showed earlier this morning. Over the first half of this financial year borrowing was up more than six times higher than a year earlier, due to the huge cost of the coronavirus pandemic. British finance minister Rishi Sunak stated that things could have been far worse had the government not acted to protect livelihoods. There was little economic data to comment on for the UK, which meant pound volatility has been based on these headlines. GBP saw lows against both the EUR and USD early Tuesday afternoon, touching 1.0935 and 1.2914 respectively. Sterling has recovered this morning as data showed inflation came in better than expected and on renewed hope that Brexit negotiations end their recent deadlock. GBPUSD is back above 1.3000 and GBPEUR is making a push for 1.1000.
Key MoversThe US dollar continued to be sold off yesterday as the white house and Democrats in the US congress moved closer to agreeing a new coronavirus relief package. Negotiations are expected to continue again today with many hoping for the aid to be agreed prior to the presidential election, 3rd November. As mentioned, GBPUSD is back above 1.3000 this morning and EURUSD, which started the week at 1.1700, is now above 1.1850.The onshore Chinese yuan has jumped against the US dollar, the strongest since July 2018. The growing optimism about China’s economy and the pending US aid package have both been contributing factors to the yuan strength, but it seems the move is also to do with US presidential candidate Joe Biden taking a lead in the polls. If Joe Biden was to be the next president of the US, it is believed this could lead to an improvement in ties between China and the US.
- GBP/USD: 1.2930 - 1.3090 ▲
- GBP/EUR: 1.0940 - 1.1040 ▲
- GBP/AUD: 1.8340 - 1.8490 ▲
- GBP/CAD: 1.6990 - 1.7140 ▲