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Risk aversion leaves the pound stumbling

GBP - British Pound

After risk appetite seemed to be rearing its head earlier in the week, with positive news around possible Coronavirus vaccination breakthroughs and better than expected data, risk aversion was back on the menu on Thursday. The pound slipped versus the safe haven US dollar, after escalating tensions between Trump and China continued. This coupled with weaker than expected UK GDP data this week, which left investors wondering whether Sunak's fiscal stimulus measures are enough to prop up the UK economy, left the pound reeling. Even a posting of upbeat Chinese growth data could do nothing to stem the risk off sentiment.

The pound slipped a quarter of a percent to 1.2556 versus the US Dollar, even though data showed the slide in Britain’s jobs market eased in June. Employees on company payrolls did drop by a whopping 649,000 from March to June, but the largest declines appear to have taken place at the start of the lockdown.

Key Movers

Overnight, the US Dollar held onto gains against most currencies as worries that a resurgence in the Coronavirus is starting to curb economic activity, promoting the safe haven currency's popularity among investors. There are troubling signs in recent data that a relentless surge in Coronavirus infections is threatening the US economy, while the deteriorating US - China situation could see the US Dollar remain our popular friend for some time yet.

Another jump in Coronavirus infections has forced California and other US states to enforce partial shut downs, raising fears the economy and employment will continue to struggle in the US. Donald Trump’s administration is considering banning travel to the United States by all members of the Chinese Communist Party, a move which is sure to add wood to the fire between Washington and Beijing.

The Euro remains in close focus today, as EU leaders meet in Brussels to talk through their differences and find a solution to the proposed stimulus package. Time is not on their hands, with the Coronavirus already causing significant damage to EU economies, the eventual lifting of fiscal stimulus measures across European countries may only worsen the situation, and this stimulus package maybe the only cause for respite. Even if the eventual package is smaller than the 750bn Euros currently proposed, the Euro will could benefit from the news, particularly versus the US Dollar.

Have a lovely weekend all!

Expected Ranges

GBP/EUR: 1.0960 - 1.1020 ▼

GBP/USD: 1.2510 - 1.2580 ▼

EUR/USD: 1.1380 - 1.1460 ▲

GBP/AUD: 1.7810 - 1.8020 ▼

GBP/NZD: 1.9020 - 1.9310 ▲