Sterling bounced back yesterday, with a breakthrough the 1.10 level against the single currency and a move north of 1.2% against the US dollar. Those gains have been held and the rate for cable is holding above 1.24 at the time of writing. The move was put largely down to month-end rebalancing by large financial institutions, who look to realign their books to cover currency exposure. Despite the positive rebound for the day, GBP is still one of the worst-performing currencies in the G10 in 2020. In a current dovish trend for GBP, the technical analysis shows the next move lower could push to the 1.0880 mark against the euro and 1.2265 against the dollar.
Yesterday, UK Prime Minister Boris Johnson made a speech in the West Midlands where he announced the government will be putting forward £5bn worth of infrastructure spending in the UK, which was originally planned for 2021. He said that they plan on using the COVID pandemic “to tackle this country’s great unresolved challenges” from the last 30 years.
He also highlighted the dangers that the virus still poses on the UK. He said it is “still circling like a shark in the water” as seen in Leicester where non-essential shops have been ordered to close again due to an increasing number of cases. This feeds into the fear of a second wave of cases hitting the UK, which could have an even worse effect on the economy. However, the pandemic seems to be better controlled compared to the US, where they have recorded over 40,000 new cases in four of the last five days.
Have a great day,
Author: Jack Nicholls, Relationship Manager
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