Since the 23rd March the UK has been in lockdown which has seen big falls for the stock market owing to the uncertainty of when the UK will be ‘getting back to work’. Pound sterling has however, during this time managed to improve against a number of different currencies including vs the euro and the US dollar.
Sterling exchange rates prior to the lockdown suffered particularly vs the US dollar as the pound fell to its lowest level to buy US dollars since 1985. Indeed, at a point the GBPUSD exchange rate fell as low as 1.14 on the Interbank level. However, since then the Bank of England intervened with additional stimulus measures as well as introducing a further round of Quantitative Easing to provide as much as £200bn in support.
UK Lockdown Guidelines to Impact GBP Exchange Rates
Later this week all eyes will be keenly focused on what is happening with the latest lockdown rules. Prime Minister Boris Johnson is due to address the nation on Thursday which will be the most eagerly anticipated statement by the Prime Minister since the 23rd March. Suggestions are that the guidelines will then be put on place on Sunday as the UK has its own bank holiday on Friday. Therefore, if rules were relaxed prior to that date then this could see huge amounts of people meeting up which could cause further contagion and potential GBP weakness.
Among some of the rules being considered is a staggering of the work day according to Transport Secretary Gran Shapps as this would encourage less crowded commutes. Meanwhile, the Cabinet office minister Michael Gove suggested a staged easing would mean that the government could monitor and then manage ‘localised’ outbreaks if necessary.
In the meantime, an NHS app under development is being trialled this week on the Isle of Wight. Depending on the success of this trial it could then be adopted on the mainland as this technology is currently being used by other nations who also aimed at using it to combat the spread of the virus.
Turning the focus towards the continent and Italy, France and Spain have all consistently seen their lowest mortality rates in weeks which highlights the success of the lockdown. France is planning to lift its lockdown restrictions by allowing people to travel up to 100km from their home as well as allowing a number of businesses to reopen.
Bank of England Interest Rate Decision and Meeting to Offer Insight on the UK Economy
Later this week Thursday could be arguable the most volatile day for sterling exchange rates as Boris will be addressing the nation as well as the Bank of England announcing their decision on early Thursday morning.
The release will come early in the morning compared to the usual 12pm announcement. Some analysts think there is a big announcement coming whilst the central bank themselves have claimed that it is to allow enough time to provide a more detailed statement about the latest Financial Stability Report which is also due out on Thursday. Whatever the announcement brings could cause movement, especially in the early morning so make sure you’re well prepared to move if you have a requirement coming up involving GBP in the short term.
Sterling Fails to Make Further Gains Against the Dollar Despite Poor US Economic Data
Turning the focus towards the US and they are very keen to get back to business according to US President Donald Trump. First quarter US GDP showed a fall to -4.8% which was the first contraction since 2014. Jobless claims have shot up past 20 million and counting recently and we have US Non-Farm Payroll data to end the week as well. This particular data release can often have huge implications on the foreign exchange market as the US is the world’s leading economy.
We recently saw the impact on the commodity based currencies with the Australian dollar, New Zealand dollar and the South African rand all weakening against the pound following the negative data released in the US towards the end of last week. Therefore, any further signs of problems for the US economy vs the expectation could cause further losses for the commodity based currencies.
GBP Remains South of 1.95 Against the AUD
Keeping the focus on the commodity based currencies and the Reserve Bank of Australia is due to meet overnight to discuss their latest interest rate decision. The current interest rate down under is at 0.25% so any change or suggestion that another intervention via the RBA could cause further movement for GBPAUD exchange rates. Therefore, if you’re in the process of exchanging Australian dollars it would pay to ensure you’re well prepared to make a transfer.
If you have a currency transfer to make and would like to a free quote compared to using your own bank then contact me directly and I look forward to hearing from you.