Yesterday’s pound trading remained relatively steady in a sideways channel, as the market enjoys the relative calm before the potential storm of Thursday’s Bank of England meeting. As it stands, it’s not a foregone conclusion that the Bank will vote to increase the amount of quantitative easing to assist the UK economy, with the usual result, in this case, being a negative for the pound. Simply put, if there is more of something, then value decreases – this is true of most things in life, but especially with currency.
Thursday was already shaping up to be a busy day for sterling traders, as most of the headlines have been focused on the Government’s lockdown review for the same day, where Prime Minister Johnson is expected to outline his “roadmap” for lifting the economic and social restrictions. This will give sterling traders an insight into how quickly the UK economy will open up, with a fine line being trodden between racing to help businesses re-open and risking a potential second wave of cases. So far, the news that the curve has been successfully flattened means that a gradual re-opening should be on the cards sooner rather than later for the UK.
However, such a gradual return to normality do have their time limits for an impatient market – look no further than across the Irish Sea, where Irish Taoiseach Leo Varadkar announced a phased lifting of lockdowns running through until August, causing a dent in euro sentiment over the seemingly long relaunch time.
Have a great day,
Author: Joshua Haden-Jones, Senior Relationship Manager
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