GBP was the standout currency performer yesterday, although it was unable to maintain an upward trajectory as the day drew to a close.
The positive sentiment followed the Bank of England’s monthly update where there was little surprise that interest rates were staying at 0.1%. Andrew Bailey spoke to the BBC and made it clear that he backed the ending of furlough scheme in October. Policymakers have a responsibility to keep workers “moving forward” and not keep them in unproductive jobs. This is somewhat of a double edged sword, but the BoE are now confident the economic slump will be less severe than original forecasted, however it may take longer to fully recover. Consumer spending is leading the charge with spending on foods and energy back to pre-covid levels, whilst money exchanging hands on entertainment and leisure, which accounts for 1/5th of consumer spending, tails behind. As mentioned previously, chatter surrounding negative rates remains a significant threat to GBP sentiment. The banking system is already under a huge amount of strain and the risk of unintended consequences remains high – despite that, the BoE maintain it remains in their toolbox, for now.
Prior to the day getting underway, German industrial production for the month of June printed a strong 8.9% growth, re-affirming their position as the engine room of Europe. EURUSD was unmoved by the result and continues to hold steady at 1.1830.
US employment data is due out at 12:30BST. These figures have been somewhat chaotic and very difficult to simplify, but the market is looking for 1.6m people to be re-added or added to the jobs market. The prior month saw 4.8m people added. Average earnings are expected to pick up from negative 1.2% to negative 0.5% which provides a better indication of what’s happening on the ground. GBPUSD has begun gravitating back towards 1.30 again, so this data release will be important as we head into the weekend.
Have a great Friday and a good weekend.
Author: Alistair Hutson, Senior Relationship Manager
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