22/06 – Dollar strengthens as equities fall

GBP: Sterling weakens in response to equity sell-off Friday
EUR: EUR/GBP strengthens amid concerns of a Coronavirus resurgence
USD: Dollar strengthened in riskier climate

GBP

Sterling has bounced back from the lows we saw at the end of Friday. Despite retail sales increasing by 12% compared to last months figures, these still significantly lag behind the pre Covid-19 levels. Public sector borrowing was also greater than market expectations, highlighting that the UK’s debt levels seem to mount at an accelerating rate. Sterling weakened on Friday as global stocks were weighed down due to concerns of a Coronavirus resurgence, with case numbers increasing in parts of the US, Europe and China.

There was a virtual EU summit last week, where both the UK and EU signalled an intent to have more “intensified” negotiations starting June 29th. There appears to have been a shift in mood, with both sides looking to see where a compromise can be made. It will be interesting to see if there are any developments in the negotiations as a result of this.

EUR

Like last week, the euro remains on the backseat at the moment. However, it did strengthen further on Friday against sterling as concerns about a Coronavirus resurgence filtered through the market. On Tuesday manufacturing and services PMIs are being released from across Europe. The data readings will realistically all be below 50, although it is questionable whether they will have any impact on the euro.

USD

The dollar continued to strengthen on Friday as a safe haven currency following a further slide in equities. Equities slid Friday afternoon as Florida Covid-19 cases rose 4.4%, compared to the previous 7 day average of 3.2%. This seemed to reiterate the growing trend in the US that the Southern states are struggling to flat line new case numbers.

It is a relatively quiet week ahead for the US on the data front, with Covid-19 news likely to be the significant currency driver this week. On Tuesday manufacturing and services PMIs are out in the afternoon, GDP figures along with unemployment claims are out Thursday afternoon.

Have a great day and please take care.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.