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Sterling suffers on recovery strategy

GBP - British Pound

GBP – British Pound

Prime Minister Boris Johnson came under scrutiny yesterday as the cautious plan to get Britain back to work from the coronavirus lockdown prompted confusion. The latest round of updates came in the form of a House of Commons address, adding more detail from the Prime Minister’s solemn TV appearance on Sunday. This was also supported by a 51-page document entitled “Our Plan to Rebuild: The UK Government’s COVID-19 recovery strategy” with further pages outlining sector-by-sector guidance, but Labour Party leader Keir Starmer said the government had been issuing conflicting guidance that did not answer the public’s practical questions about going back to work. This was supported later in the day when Boris Johnson actually took some hard-hitting questions from the public. Sterling didn’t perform well on the gradual release of information from Sunday, falling against both the Euro and US dollar as markets opened on Monday. GBP/USD fell from 1.2450, the peak seen Friday after poor employment data form the US, to a session low of 1.2290 and GBP/EUR mirrored this movement falling from 1.1464 to 1.1366. Both currency pairs are a touch higher this morning from these lows.

Sterling will take guidance from the US inflation data for movement against the US dollar – due at 1:30pm. No surprise to see we are expecting a revision lower from the bureau of labour statistics after the recent wave of poor data from the US. GDP data from the UK tomorrow and from Europe on Friday are worth noting as this week pans out for GBP/EUR.

Key Movers

Key Movers

The US dollar was boosted yesterday by a lack of risk appetite from investors as anxiety grows on a second-wave of the coronavirus. Countries that had started to action their recovery plans from the virus-related restrictions have been hit by new infections with Wuhan reporting 5 new cases, a fresh outbreak seen in South Korea and Russia seeing a record number of new cases in a day. The news saw a flight to safety among investors, buying into assets such as the US dollar, Japanese yen and Swiss franc. The risk-off sentiment would have only been bolstered overnight as Donald Trump opposed renegotiating the US-China “Phase 1” trade deal and as China suspended abattoir imports from the US and Australia. A move that sent the Australian and New Zealand dollars tumbling as China is its number 1 trading partner. EUR/USD fell below 1.0800 overnight and GBP, which had fallen across a number of currencies yesterday, has seen gains against the Antipodean currencies. GBP/AUD pushed above 1.9100 and GBP/NZD 2.0300 overnight.

Expected Ranges

GBP/USD: 1.2270 - 1.2390 ▼

GBP/EUR: 1.1360 - 1.1440 ▼

GBP/AUD: 1.8960 - 1.9130 ▲

GBP/NZD: 2.0160 - 2.0340 ▲

GBP/CAD: 1.7210 - 1.7350