Sterling continued to follow its downhill path yesterday, falling to a fresh low against the euro. Moving to around an eight-week low, more misery continued with the dovish sentiment around the health of the economy. As previously discussed, there are murmurs of negative interest rates on Threadneedle Street, with high profile figures being cited in news outlets that negative interest rates could become a reality. In an attempt to boost economic activity and spending by a population, these measures have already been undertaken by the European Central Bank and also Japan. Now, even the Bank of England’s newly appointed Governor, Andrew Bailey, has admitted that negative rates could be a tool that the Monterey Policy Committee will look to. This shows the severity of the situation the UK is currently in as, when he took the helm in March, he was quoted as saying that negative rates were not “plausible”. In the bank’s 324-year history, rates have never been negative.
Data out of the Eurozone this morning paints a picture which is to be expected. France and Germany released PMI data, which in summary says that the economy is not where it would have been pre-COVID. The situation has a better showing than April, as full lockdown swept across Europe and a lot of the globe, which is again to be expected.
Markets have not necessarily reacted to the news with charts continuing to seek direction. Some confidence from Italy this morning has Prime Minister, Giuseppe Conte, saying the worst of the country’s coronavirus emergency is behind them.
Have a good day,
Author: Jack Nicholls, Relationship Manager
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