Sterling higher on Sunak spending spree
Thursday 9 July, 2020
Daily Currency UpdateGBP - British PoundIt has been a good 24 hours for the pound as another round of stimulus from Chancellor of the Exchequer Rishi Sunak buoyed the pound as he continues to attempt to shield the UK economy from an extended Coronavirus driven depression. A lot of Sunak's policies were expected however it could be said he surprised to upside with the waiving of stamp duty for nine months on house purchases up to £500k, and bonus payments of £1000 to business' per employee who retain formally furloughed staff to the end of January 2021. He also put in place a series of schemes to help young workers trying to find work; grants and payments to help homes become more carbon efficient, as well as a month long effort to help the hospitality sector by offering everyone in the country a £10 discount on eating out Mon-Wed at participating restaurants throughout August. The total cost of the above is expected to be around £30b and we shouldn't rule out Sunak getting his chequebook out again in the Autumn should unemployment rise rapidly, as is widely expected.As mentioned a lot of the above was telegraphed before the speech so sterling drifted higher then fell back in the immediate aftermath. It then rallied as US markets came online and has pushed a little higher throughout the Asian session. GBP/USD peaked at 1.2650 before falling back a touch. The pound hit resistance at 1.1150 against a currently well bid euro. It currently trades around the 1.1145 level.
Key MoversA mixture of Coronavirus fears and global tensions with China re: Hong Kong continue to hang over equity markets around the world putting the breaks on a huge rally seen over recent weeks. Global cases have now topped 12m with nearly 550k deaths registered, around a quarter of these are in America where infections continue to rise in southern states. As well as Coronavirus, ratcheting tensions over China's security law in Hong Kong are putting more and more countries at odds with the world's second largest economy. The latest country to hit the headlines is Australia who has suspended its extradition treaty with HK and has offered long term visas for skilled HK workers mirroring similar moves recently seen by Canada and the UK. Data wise there are finally some top tier numbers to crunch later with the weekly US unemployment figures due out at 1:30pm with just under 1.4m predicted to have applied for unemployment insurance last week. Although far less than the 6.6m posted in early April, it is still expected to be an eye watering number. To put it into context throughout 2019 this figure was generally between 200-250k a weekEUR/USD trades at 1.1335 and USD/JPY is at 107.25.
- GBP/USD: 1.2530 - 1.27 ▲
- GBP/EUR: 1.1090 - 1.12 ▲
- GBP/AUD: 1.80 - 1.82 ▲
- GBP/NZD: 1.9050 - 1.9230 ▲
- GBP/CAD: 1.6930 - 1.71 ▲