GBP - British Pound
The UK’s economic calendar was clear on Wednesday so GBP was at the mercy of developments elsewhere. This actually played into Sterling’s hand as the quid held onto the gains made against most pairs in the days previous trade. All eyes were firmly on the FED rate statement out of the US. Prior to the 7pm announcement GBP/USD made a charge for 1.30, its highest level since early March, however following the FED statement there was some retraction and the pair has come to rest at 1.2980.
In the one release we did have it didn’t make pleasant reading. The number of cars built in the UK over the past six months has slumped to the lowest since 1954, down 42% on the same period last year. The trade body estimated that 11,349 jobs were lost in the past six months at carmakers and companies which supply them with parts and services. In an effort to combat small businesses from collapsing it’s been widely reported over the last 24 hours that the Government is expanding its COVID-19 rescue loan scheme, a move which some believe has come too late.
While Sterling has enjoyed a brief upturn of late, our broader view remains bearish as Brexit uncertainty and questions over the economies ability to rebound after the Pandemic weigh on the currency.
The USD marked a fresh two-year low on Wednesday as the FED affirmed its dovish stance and offered little in the way of forward guidance. The FOMC reiterated its pledge, to commit its full suite of monetary policy tools for as long as it takes to guide the economy through the recession triggered by the COVID-19 outbreak. Fed Chair Jerome Powell painted a bleak picture as the US struggle to contain the virus and 21 States have been urged to roll back social distancing restrictions in a bid to curtail the spread and ease the pressure on the hospital system. The dollar index fell to 93.17 its lowest point since June 2018.
The Euro made fresh highs, pushing through 1.18 to touch intraday highs at 1.1805. Investors continue to dump the USD in favour of the single unit as EU fiscal support and COVID-19 containment open the door to a faster paced recovery than that likely in the US. With expectations the Fed will maintain it ultra-loose monetary policy setting well into the future the dollar outlook remains bleak. Key fundamentals that previously propped up the worlds base currency have been rapidly eroded and right now the only point of support is shifting risk demand.
1.2950 - 1.3020 ▲
1.1030 - 1.1090 ▲
1.8120 - 1.8210 ▲
1.9520 - 1.9620 ▲