GBP - British Pound
After a small glimmer of hope yesterday in the form of some positive UK PMI data, UK Retail sales this morning disappointed investors. Yesterday's PMI data was expected to be bad, but the blow was softened for sterling when manufacturing particularly, came out stronger than expected at 40. This morning saw UK retail sales released at -18.1% versus an expectation of -15.8% and shows that sales in the sector are down significantly on previous month. This marks the third straight month of declines in spending and the 5th of 6 months of lower spending and somewhat explains the under-performance of sterling versus it's peers.
Sterling jolted higher yesterday morning on the news, but seems to have lost all its momentum after this morning's poor data, trading below 1.22 and 1.12 on GBPUSD and GBPEUR respectively.
UK officials are also talking openly about the possibility of negative interest rates with Bank of England Governor Bailey noting that he’s changed his position and they shouldn’t rule out anything. With yesterday's historic news that the yield paid on UK government debt had headed below 0 for the first time in history, the market is starting to think that negative interest rates in the UK is a real possibility, which will put significant pressure on the pound.
Yesterday saw bank holidays in major locations such as Switzerland, France and Germany, though PMI data was released across the board in Europe. French numbers were impressive, beating expectation and previous figures, however manufacturing fell below expectation in Germany. Figures were in contraction across the board, and there is a long way to go before we get back to anything showing expansion in the Eurozone.
Unemployment figures remained in focus in the US, with another eye watering figure of 2.4 million people claiming unemployment. These latest figures mean that a staggering 39 million Americans have lost their jobs in the last nine weeks. Though Trump has been forceful about easing of the lockdown, this appears to not have had an impact on the unemployment figures, as they remain on a relentless path higher.
The USD strengthened against most of its major peers yesterday, but the gains remained pegged after investors remain concerned about the re-escalation of the US-China trade wars. The Trump administration approved arms sales to Taiwan at the opposition of China and the Senate passed a bill that could delist Chinese companies from US exchanges if they cannot prove that they are not owned by the Chinese government.
With that said, PMI reports across the globe reinforce early signs of a global recovery, with investors being happy that growth is moving in the right direction. Across the globe we are seeing a faster recovery in services than manufacturing, as more of that sector were able to continue working from home through lockdowns. If PMI's continue in the right direction, this in itself could support major currencies from meltdown.
1.2130 - 1.2210 ▼GBP/EUR:
1.1120 - 1.1190 ▼EUR/USD:
1.0880 - 1.0960 ▼GBP/AUD:
1.8530 - 1.8730 ▼GBP/NZD:
1.9850 - 2.0030 ▼