The pound has begun the day once again in positive territory against the majority of currency pairs, even if only just. Sterling exchange rates have been climbing slowly throughout the week and although the pound to euro rate is yet to test the 1.12 level, it’s getting closer each day and so far this morning the pair have climbed as high as 1.1180. Cable (GBPUSD) is now back above the 1.32 handle after a very impressive run, and over the past 3-months cable has climbed by almost 8% with the current trading levels being the highest throughout this time frame.
Sterling Rising Despite Brexit Impasse
The market movement for sterling at the moment is positive, and sentiment surrounding the UK economy and the pounds prospects seems to be surprisingly high considering the importance of the remainder of 2020 to the UK’s future. As many of our readers will be aware the UK’s current Brexit transitional period will expire at the end of the year. The UK government opted not to request an extension to the transitional deal back in June which was their last opportunity, and both UK and EU negotiators have outlined publicly their hopes of a deal being agreed upon by October. October is significant as mid-month there will be an EU Summit where the trade deals can be discussed. It would also allow new trade deals to be written into law and planned for by the end of the year. You could expect October to be busy for sterling exchange rates and there could be some considerable volatility due to the Brexit updates around the time.
Investors and the financial markets don’t seem overly focused on this at the moment, which is probably why the pound has been climbing despite the potential for a busy few months. The most recent updates from the key negotiators such as the EU’s Michel Barnier and the UK’s David Frost. Barnier commented last Friday that he was ‘concerned’ about the state of the talks as they remain deadlocked at the moment.
Better Than Expected Service Sector Data Provides Support to UK Economy
In terms of the state of the economy, the UK like many other nations faces a recession which has of course been brought about by the lockdown measures to counter the coronavirus. As the UK isn’t alone in this matter it’s likely that it shouldn’t hit the pound’s value unless the UK begins to underperform other nations in a similar position. On a more positive note there was some very impressive Retail Sales figures released out of the UK recently. The services sector makes up 80% of GDP so this is a good indicator of a V-shaped recovery which is what analysts are hoping for, but it could be the case that once the governments stimulus schemes are over there could be a downturn. This may be worth following due to the importance the sector has on the UK’s overall economic output and its knock-on effect on pound sterling rates.
Key Dates That Could Affect GBPUSD Rates This Week
The key economic event today is likely to be the speech from U.S. Federal Reserve Governor Jerome Powell will be speaking just after 2pm UK time. He will be speaking at the Jackson Hole Symposium which is an annual event held in Wyoming and usually attracts an important crowd of central bankers and Fed Reserve spokespersons. Due to the volatile times in the US at the moment along with ongoing trade war talks between the US and China along with the impact of Covid-19 on the global economy, this years symposium could be followed very closely. If any references to future monetary policy, or disappointment from Fed Chairman Powell could result in market movement so it is worth keeping a close eye on.
Economic data due out of the UK this week is very light, so the symposium may be the biggest potential market mover for the pound especially if Brexit is a hot topic or alluded to. Aside from this, Jobs related data out of the US later today and also the inflation data due out of the US tomorrow could also impact currency markets. Today US Initial Jobless Claims and GDP figures will be released around 1.30pm so feel free to get in touch if you wish to plan around these data releases.
If you have an upcoming currency transfer and would like to learn more, feel free to get in touch using the form below to discuss these factors in more detail. I’ll be happy to get in touch personally.