Last week wasn’t the best week for the pound with sterling finishing lower against pretty much all the majors. GBPUSD interbank rates started last week at 1.2430 before slipping to 1.2114 Friday, and GBPEUR began the week at 1.1454 before slipping to 1.1193 on the interbank rate by the end of the week.
Two of the key reasons were the struggling of the Brexit talks with the UK openly attacking the EU’s approach, and also poor UK economic growth figures showing the UK is likely in recession.
Rishi Sunak, the UK Chancellor has indicated this week that the UK is now likely in a significant recession, which further weakened the pound following news that UK GDP came in at -2% for the first quarter of this year.
Considering that was the period just after the lockdown came into force, it seems reasonable to be fearful over how the UK economy fared in April. The Q1 period covers January to March and the lockdown was only in place from the 23rd March, it will be most interesting to find out how April’s numbers come out when that will include data for a period where the was in total lockdown.
Brexit has been a topic which has often seen the pound losing value, simply because investors need to know what the future state of the economy will be to invest and have confidence. Brexit is an unknown and the stalling of trade talks with the EU points towards a hard Brexit or no-deal, when the current transitional phase expires in December.
Sterling has also struggled because of the poor outlook as a result of the Coronavirus, with the UK now one of the worst affected countries in the world. It is difficult to be overly optimistic and positive when you read some of the number of deaths which are for UK now well over 50,000.
With the UK remaining under the lockdown as much of the world and Europe gets back into action, the UK government has been criticised for its handling of the crisis by many. When you see that some countries like Australia and New Zealand have had very few cases, it does beg a question could things have been different?
The easing of restrictions that have taken place have been received in mixed fashion and there is definitely an underlying fear that it might only lead to further infections, allowing the virus to spread again.
Reports that Germany, South Korea and China have all see fresh new cases indicates the path out of the lockdown will not necessarily be straightforward.
Pound Sterling Forecast: Where Next Week for Sterling Rates?
The pound is not out of the woods by any stretch of the imagination, next week us Unemployment data for the UK. This release is a typical market mover and it will likely feature in headlines and influence investor sentiment towards the pound, just like the GBP and growth data did this week.
We also have UK Retail Sales figures, another big release with potential market moving potential. With consumers tuck at home it seems retail is activity is bound to have suffered, but to what extent and by how much will become apparent from the data.
For the Eurozone we have the latest Inflation data which might well influence GBPEUR levels, and there are some speeches by members of the Federal Reserve bank in the United States which may prove vital for GBPUSD levels.
The pound could have quite a bit of work to do to shake off the latest sentiments, all too often we have seen the pound losing ground and struggling to make it back up. Having said that, the pound might well rebound should the news appear to be not so bad as expected. It should also be said that the Eurozone and the US are also struggling to combat the Coronavirus and poor or worse news there could see those currencies coming under similar pressure.
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