GBP eager to move higher

19th February 2020 Market Update

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?? GBP - Despite a strong jobs report it was the news that the Budget will take place on March 11th that boosted sterling the most yesterday. Rishi Sunak, the new Chancellor, has kept the date set by Sajid Javid but sterling remains hopeful that he will throw out some of his predecessor’s prudence.

Yesterday’s numbers showed that the overall picture of the UK labour market is that of continual improvement; more people are employed, and wages are still rising in real terms. Increased business sentiment will help at the margin but there is only so long that this can continue.

Sterling has slipped back a little overnight. This is equally a reaction to a stronger dollar, concerns ahead of this morning’s inflation number and the knowledge that both the UK and EU remain poles apart in their initial Brexit trade negotiations.

?? EUR - The weakness in the euro has continued overnight and EUR/USD now finds itself at levels not seen the French election back in 2017. While the euro may be cheap, we think that markets will still push for further weakness in the coming days and weeks. All eyes remain on Friday’s manufacturing sentiment announcement and a disappointment there will only add fuel to the fire for the wider euro negativity.

?? USD - Fears over what the news from Apple on Monday night might mean for the wider global economy saw trade-focused currencies slip and havens, like the dollar, benefit. Markets will pay a little bit of attention to tonight’s minutes from the latest Federal Reserve meeting but given that Coronavirus had only just started to enter the global consciousness, a lot of their wider global forecasts will have now been revised.

Summary:

GBP: Needs a rebound in inflation to push higher
EUR: Cheap but not cheap enough
USD: Continues to be bought on virus fears

 

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