Last week we saw GBPEUR exchange rates decline to 1.0970 as the Euro caught a major bid throughout the week following the EU recovery fund news- we also saw EURUSD gain around 2% on the week, which in many trader’s eyes is now overextended- however, this doesn’t mean it can’t continue, but there are a few factors ahead of us which could control that outcome. GBPUSD exchange rates continued to move up as the Dollar has been sold off for the last few weeks consistently- and GBP generally beating expectations and being a more favourable risky investment for traders at the moment.
GBPUSD is in a tricky place right now, last time we hit 1.28- we came straight down to 1.23 again- so I am watching this level very closely- with coronavirus cases increasing rapidly again in the U.S- it may be that traders move into the U.S Dollar again as a safe haven, and as there are now more cases being reported in Europe (i.e Spain)- then we could see GBPEUR move up, and GBPUSD move down. (This is a move we have seen often throughout this period).
The UK Government has now added Spain back on to the quarantine list as we have seen a spike in cases in Spain- no doubt this will have an effect on economies just as things were beginning to turn normal again- and it may also encourage more border restrictions over coming weeks from the British Government.
Brexit talks are also not going very well, but the market has shrugged off these risks for now as realistically we have until October to look for agreements, so for now, Brexit isn’t a headline risk for Sterling (At least for another month or so).
Not much data of note out this week- so I will just be watching coronavirus numbers closely to determine GBP,EUR & USD. I think a scenario of Dollar gaining Strength and the Euro weakening could be on the cards, but this is all case dependant- if you have an upcoming transaction and would like to look at strategy- please don’t hesitate to contact me.