GBP - British Pound
UK manufacturing and services PMI both came out slightly better than expected this morning, showing some early but promising signs that the UK economy is in the process of being restarted after the lockdown. The figures were predicted to be weak, but manufacturing came out at 40.6 versus 35.1 expected and services at 27.8 versus 24.1 expected. After yesterday's slightly worse than expected inflation data, this was a slight sigh of relief for sterling.
However, pressure remains on the pound after after the yield paid on UK government debt fell below 0% for the first time in history. Expectations for further declines in the currency continue to grow on a view that the Bank of England would soon cut interest rates to below zero in an effort to further support the economy. Appearing before parliamentarians on Wednesday, Bank of England Governor Andrew Bailey said negative interest rates are under active review and that "we do not rule things out on principle".
Against the Euro, the pound is currently sitting near a 7-week low and under performed the majority of its G10 rivals in recent days.
FOMC minutes were released from the US yesterday afternoon, suggesting there was no real chance of negative rates in the US anytime soon. The minutes also showed agreement in that recent actions taken by the federal reserve were essential in helping to reduce downside risks to the economic outlook. However the US Dollar seems to remain on the back foot even after the positive news.
At last month’s meeting, the Fed said the virus poses big risks over the medium term and the crisis will weigh heavily on economic activity. In response, rates will need to remain on hold until they are confident that the economy is back on track. Fed Chairman Powell provided additional clarification in his press conference – he warned that the jobless rate could hit double digits in the next report and Q2 economic activity will fall at an unprecedented rate.
Bloomberg reports this morning that AstraZeneca received more than $1 billion in US government funding for an experimental Covid-19 vaccine from the University of Oxford, a boost to one of the world’s fastest-moving projects to develop a vaccine. Although AstraZeneca has said it expects to have shots ready as soon as September, the company’s vaccine candidate is still in human trials, with no guarantee of success. This uncertainty may result in no significant moves in the markets until we see definitive conclusions that the trials have been working.
1.1110 - 1.1230 ▼GBP/USD:
1.2190 - 1.2280 ▲EUR/USD:
1.0910 - 1.0990 ▲GBP/AUD:
1.8520 - 1.8755 ▲GBP/NZD:
1.9720 - 2.0045 ▼