GBP - British Pound
Sterling remains on the front foot versus the USD today, driven mainly by USD weakness, but also by today's early morning 7am release of UK's month on month retail sales figures. This figure, released monthly, depicts a gauge of consumer spending compared to the previous month, which accounts for the majority of overall economic activity. The figure was forecasted to be positive at 8.3%, but we instead saw a significantly higher jump up at 13.9%.
UK retail sales are now higher than they were pre-crisis, but investors remain cautious with their optimism and speculation around a 'V-shaped recovery', as unemployment levels will be the real medium term indicator of a sustained economic recovery, while we will have to wait and see if consumers feel safe enough to return to the high street, pubs and restaurants. Though sterling remains supported, this uncertainty is bound to peg back any serious gains.
In other news, we see the release of UK manufacturing and services PMI data this morning, which is again forecasted to be positive. Whether this posting will do anything to seriously derail sterling's current trajectory remains dubious though, as the market continues to discount traditional data points such as this, instead favouring to focus its attention on political sentiment and virus-related headlines.
The EUD remains the darling of the currency world, and it continues to do no wrong. In the past, we have seen its rise to fame, trading from the 1.12 handle to the 1.16 handle versus the USD in 4 weeks, while this morning's rally marks 9 out of 10 days of gains for the single currency.
It's easy to see why investors continue in their pursuit of the EUD, after this week saw European Union leaders put their differences aside and came up with a very powerful stimulus package that not only sends a strong message to the market but will go a long way in cushioning an already recovering economy. Juxtaposition this with the US government, who are struggling to get control of the COVID-19 outbreak in the US and fail to agree on a stimulus package.
This divergence in popularity between USD and the EUD could come further into focus today with the release of both Eurozone and US PMI data. Expectations are that Eurozone data will carry on in it's current vain of positivity, while in the US, we could see early signs of a much slower recovery. Many US states have now paused or rolled back re-opening their economies, which is bound to feed into weaker than expected data posting soon.
We must also remember that amongst all this, the US remains entangled in a messy and escalating trade war with the Chinese government, which could cost their economy dearly. All in all, the short term prospects for the US Dollar remain weak, while the Euro goes from strength to strength.
Have a great weekend all!
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