Good morning,
GBP kicked off the working week yesterday with its best one day gain for weeks off the back of a quadruple hit of good news, boosting the currency over 1.5% against USD and nearly 1% against EUR. This positive uptick is despite the news that the chief aide to the UK Prime Minister, Dominic Cummings, broke lockdown rules which had the potential to snowball, with some thinking the political embarrassment could bring down Boris Johnson’s government.
The first bit of positive news came early in the day, as Reuters reported from sources that the EU is ready to move the goalposts in their demands for access to UK fishing waters when the two sides part ways to become independent of one another. The fishing territory was one of fierce debate and a cornerstone of the Vote Leave campaign back in 2016. However, there will, of course, need to be compromise within the negotiations from the UK’s side and only time will tell as to how this plays out.
Andy Haldane, the Bank of England’s chief economist, then came out to say that the UK is not near setting negative interest rates and that the economy was “a shade better” than previously forecast. This means the bank’s stimulus package may be working. Although he has erred on the side of caution, which is understandable, it is positive news for the UK, which has had the looming threat of negative rates since Haldane first spoke about the possibility nearly two weeks ago.
As mentioned previously, GBP follows the stock markets and when there is investor confidence, the pound also benefits. As the FTSE rose yesterday, GBP was pulled up with it as traders entered the markets with more risk appetite in hopes of life coming back to what it previously was months ago.
Finally, Prime Minister Boris Johnson held the daily coronavirus briefing where he outlined more detailed plans on how to open the economy. Some venders could open as of the beginning of June, in line with the return of schools, with non-essential retailers then looking to open later in the month.
Despite the pound falling slightly through the Asian session, things could finally be looking up for GBP.
Have a good day,
Author: Jack Nicholls, Relationship Manager
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