Daily Currency Update

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Sterling rocked to its core as it is relegated to junk status

GBP - British Pound

Yesterday morning it was as if the pound stepped into the ring with Mike Tyson, only to go 12 rounds and get knocked out in each one. The market opened around GBP/USD 1.20 before at one point hitting 1.1470, levels that may seem more familiar to GBP/EUR. However, even GBP/EUR took a bruising as well as it dropped to 1.0520. The moves don't have the normal Brexit motives behind them and even the response from the UK government can't be accused of being halfhearted. The key issue however is that investors are now fundamentally worried about the UK's ability to pay for its bailout alongside the fact that the UK has the largest current account deficit among the G10 currency space. This makes it particularly vulnerable to effects and disruptions to the global trading environment.

For UK businesses and investors the big worry is that GBP/USD has now hit lows not seen since 1985 and there is little in terms of support between here and the all time lows of 1.05. With all things as well there is always two sides to the market and the USD is embracing its safe haven status to the detriment of the pound.

Key Movers

Without going through all the latest updates regarding cornavirus updates, the most significant update for the market comes from the ECB who announced last night a EUR 750bn package until the end of the year to stimulate the market. This package labelled the Pandemic Emergency Purchase Programme (PEPP) is on top of the standard APP and programme they announced last week. All together this equates to anything larger than the ECB has ever seen and reinforces the market view that the Euro is a safe have currency, again to the detriment of the pound. Former ECB President Mario Draghi's words that they would do whatever it takes to preserve the Euro ring true.

Expected Ranges

GBP/USD: 1.1000 - 1.1660 ▼

GBP/EUR: 1.0526 - 1.0700 ▼

GBP/AUD: 2.0000 - 2.0800 ▲

GBP/NZD: 2.0000 - 2.1000 ▲

GBP/CAD: 1.6660 - 1.6900 ▼