The Pounds surge continues on trade talk optimism
Wednesday 3 June, 2020
Daily Currency UpdateGBP - British PoundSterling continued its positive run on Tuesday after signs that the UK might be willing to compromise on sticking points in Brexit negotiations with the European Union. The main roadblock for talks at the moment is a dispute over fisheries but the UK has extended an olive branch on this matter. Britain is willing to offer flexibility if the EU agrees to lessen its demands regarding regulatory alignment and fishing access.The news has done wonders for the Pound, where we saw GBP/USD break above 1.26, a level last seen back on the 30th April. GBP/EUR followed suit and still holds above 1.12. Future forecasts will keep the Pound under pressure though so it’s worth noting these gains could be short lived. Brexit trade talk deadlines are looming and the economy has taken a battering from Covid-19 so its hard to see these levels being maintained for any long periods.On today’s agenda for the UK, Brexit talks continue to dominate and we get the latest round of Services PMI. Services is the biggest contributor to the UK’s GDP so tends to attract the most attention in terms of currency volatility. The forecast is expected to show contraction an improvement from last months is expected. We will find out the true number at 9.30am.
Key Moverslsewhere, the economic calendar was very light. The ‘risk on’ mood has continued to dominate and overnight the biggest move was felt from the Australian Dollar. The eagerly awaited release of the GDP figure highlighted that Australia will most definitely be heading for its first recession in 29 years. Whilst this doesn’t sound promising, the AUD was boosted by the fact that the Australian economy only contracted by 0.3 percent. When you consider during the March quarter they had to contend with the ongoing drought, which saw farm GDP fall by 2.4 per cent in the quarter, and the devastating impact of the fires that were raging across many states. GBP/AUD dropped to its lowest level since October 2019 and AUD/USD rallied to a 6 month high following the release. The USD continued to falter as riots continue to take centre stage. The U.S. Department of Defence has moved about 1,600 U.S. Army troops into the Washington, D.C. region, the Pentagon said on Tuesday. Attention now turns to the main data in the form of US ADP Non-Farm Employment change at 1.15pm and ISM Non-Manufacturing PMI at 3pm. The Bank of Canada is due to release their interest rate decision and monetary policy statement at 3pm today. Like the RBA, the BOC is not expected to increase stimulus.
- GBP/USD: 1.2550 - 1.2650 ▲
- GBP/EUR: 1.1200 - 1.1250 ▲
- GBP/AUD: 1.8150 - 1.8250 ▼
- GBP/NZD: 1.9610 - 1.9710 ▼