Home Daily Commentaries UK – China Tensions Continue

UK – China Tensions Continue

Daily Currency Update

GBP - British PoundGBP finished the week in a downtrend against most currencies, in particular against the euro, dropping 0.75% on Friday. In terms of UK data this week, the focus is on June retail sales and July PMIs, which are both released on Friday. In retail sales, we expect a sharp rebound as the UK exited the lockdown measures, however the makeup of the sales will have definitely changed, from sales in shops to sales online. On PMIs, the Services PMI is expected to go back above the 50 level. While both positive, this is unlikely to prompt meaningful GBP gains given the many issues sterling is facing currently. This week marks the fifth week of the most recent round of Brexit negotiations between the UK and EU.Tensions between the UK and China have continued at the start of this week, with the UK poised to suspend its extradition treaty with Hong Kong as a reaction to China’s new security laws. Dominic Raab is expected to announce the suspension in Parliament today.

Key Movers

The euro rose to just under a four-month high against the US dollar, with negotiations well underway between European Union leaders on a recovery fund that would hopefully bring the bloc out of it’s current recession. There was a meeting between all 27 EU leaders over the weekend, in which they hoped to put together the 2021-27 budget, which is proposed above 1 trillion euros, and a linked new recovery fund worth 750 billion euros, meant to help rebuild southern economies most affected by the pandemic. This news has pushed EUR/USD into the mid 1.14 handle.It was a poor week for the US last week as daily Covid-19 cases climbed to a record high above 72,000. For the past month, the markets have largely ignored the growing health crisis in the US, but with daily cases more than doubling since late June, states have been forced to pause or roll back reopening measures.

Expected Ranges

  • GBP/EUR: 1.0920 - 1.1040 ▲
  • GBP/USD: 1.25 - 1.2630 ▲
  • GBP/AUD: 1.7920 - 1.0840 ▲
  • EUR/USD: 1.1410 - 1.1520 ▲