Daily Currency Update

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ECB spend big

GBP - British Pound

The growing pound optimism stemming from an improvement in economic and coronavirus related figures, seems to be restricted by ongoing Brexit negotiations. After the EU decided to concede on elements relating to fisheries, it all looked up for the UK. However, it seems general confidence is starting to waiver. We are now rapidly approaching the end of June extension deadline, which is arguably one of the most important dates in the Brexit calendar thus far. Without an approved extension, the chances of achieving a fair and mutually beneficial deal seems nigh-on impossible, therefore leaving the UK exposed and isolated, during a time of global economic turmoil. If this is the case, you can expect the pound to take a beating, potentially dropping to historic lows, or at least approaching the $1.04 level from 1985.

Brexit assumptions and headlines will dictate the pound's movements next week due to the lack of technical economic data. Next Friday, we see the release of UK monthly GDP and Manufacturing production. As you may expect, these won’t make pretty reading, however it’s unlikely the pound will crash as a result, as the majority of potential losses have already been priced into the market. The next real insight we’ll get into the UK economic health will be at the next BoE meet on Thursday 18th June.

Key Movers

The ECB added an extra €600 billion to their pandemic emergency purchase programme yesterday afternoon, bringing the total to €1.35tn. European businesses will be delighted with not just the funding, but the intent from the ECB. A combination of medium-term economic stress, Brexit and the coronavirus pandemic have dented EU business confidence over the past few years, and the ECB are doing a good job in providing a safety net for innovation. The Euro reacted well to the news, as it rallied against both the pound and US Dollar.

The US Dollar weakening continued into Friday’s European open, as global risk appetite improves once more, and traders begin to look to riskier assets in the hope of taking advantage of rallies in markets most affected by the Covid-19 pandemic. Alongside this, the civil unrest in America, combined with continued awful economic releases has pushed those traders still looking for safe haven assets, towards JPY, CHF or gold. The Dollar seems to have lost it’s impenetrable status, particularly as the Fed have limited stimulus options left in the locker. Dollar buyers will have one eye fixated on today's non-farm employment release from the US, as a worse than expected release, will surely push GBPUSD through the $1.27 handle for the first time since lockdown began.

Expected Ranges

GBP/USD: 1.2580-1.2765 ▲

GBP/EUR: 1.1105-1.1340 ▲

GBP/AUD: 1.8030-1.8290

GBP/CAD: 1.6960-1.7140 ▲