Sterling’s momentum continues into September
Tuesday 1 September, 2020
Daily Currency UpdateSterling continued to push higher against the dollar last week and has remained above the 1.34 handle post bank holiday, amid uncertainty regarding Brexit and a potential fuel tax hike as parliament returns to the session.
There a number of political factors that remain negative for the pound right now: Brexit negotiations are certainly not moving at any speed in the right direction, and there is a chance that in December the UK could end up without a trade deal with Europe and have to resort to World Trade Organisation rules. Among many, the odds of a no-deal Brexit are ever-increasing as we edge closer to the end of the year. The next round of negotiations will kick off on September 7th.
There have been rumours that UK Chancellor Rishi Sunak will announce in November a 5p increase in the fuel duty during his budget proposal. In a positive step, schools in England and Wales will reopen today to all Students ready for the new school year. This is a key sign of British life going back to normal as they have not been open since Mid-March.
In terms of market moving economic data for the week, the only point to mention is on Thursday where Bank of England Governor, Andrew Bailey, will be speaking at 3pm.
Key MoversThis month started how last ended, with US Dollar weakness. The greenback has consistently sold off over the past few months as it loses it’s safe haven status in the midst of global volatility. Many have critiqued the Fed’s policy since the beginning of the year and their consistent dovish tone has remained an underlying driver in the US Dollar dip. On top of a weakening economy, the US are also faced with political unrest, especially considering Trump is once again regaining momentum in the polls. Uncertainty has always damaged the strength of an economy, which is why GBP/USD has reached yearly highs and EUR/USD is once again flirting with the 1.20 barrier.
This week, we have an abundance of US employment data, in addition to ISM Non-Manufacturing PMI.
- GBP/USD: 1.3380 - 1.3490 ▲
- GBP/EUR: 1.1150 - 1.1260 ▲
- EUR/USD: 1.1940 - 1.2040 ▲