Daily Currency Update
GBP - British PoundThe pound fell on Thursday, hitting a more than five-week low versus the euro, as Britain confirmed a hard line stance on trade talks with the EU and disappointment grew that the new finance minister may not increase spending as much as expected. Britain said on Thursday it wanted binding obligations on access to the European Union’s financial market. London, Europe’s biggest financial centre, risks being locked out of its biggest market for services such as banking, insurance and asset management if it loses access to the EU in January.The new fiance minister, Rishi Sunak, has been told by Treasury officials he cannot simultaneously raise public spending as fast as Prime Minister Boris Johnson wants, keep taxes down and adhere to new Treasury rules that allow borrowing only for capital investment, the Financial Times reported.Consequently, Sunak could postpone loosening fiscal policy, which has put pressure on the pound. The possibility of more spending was the main reason the pound strengthened in recent weeks, despite concern that Britain may not agree a trade deal with the EU by the end of this year.
Key Movers
The dollar fell on Thursday as investors bet the Federal Reserve would cut interest rates to offset the impact of the spreading Coronavirus, giving the euro its largest daily gain since May 2018. With U.S. rates much higher than those of G10 peers, and therefore the scope for them to fall much wider, investors are pulling out of the dollar. Whether or not the dollar retreats further depends on economic data on the coronavirus’s impact on confidence and trade outside of China. The US Dollar has shed roughly 1% since last week, when it touched a near three-year high thanks to its safe-haven currency credentials and investors’ belief that the U.S. economy was relatively sheltered from the Coronavirus fallout. But the currency’s safe-haven appeal has worn off.New Coronavirus infections are now growing faster outside China than within, stoking fears that the economic impact on supply chains and consumer demand might be far greater than previously anticipated.The Euro has had a mixed reception but has benefitted against the pound after Boris Johnson told the EU that he would walk away with no deal if the EU doesn't come forward with a Canada style trade deal.
Expected Ranges
- GBP/USD: 1.2840 - 1.2970 ▼
- GBP/EUR: 1.1650 - 1.1720 ▼
- EUR/USD: 1.1005 - 1.1100 ▲
- GBP/AUD: 1.9560 - 1.9820 ▲
- GBP/CAD: 1.7310 - 1.7570 ▲