Pound recovers from 2 1/2 month low vs USD but remains under pressure

11th February 2020 Market Update

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?? GBP – Sterling recovered on Monday from 2-1/2 month lows, holding its own against the broadly stronger dollar following last week’s sell-off that was driven by concerns over Britain’s trade talks with the European Union.

Official negotiations will kick off on March 3, but press briefings and leaks suggest talks will be tough and have a negative effect on sterling.
Boris Johnson has announced his intention to create 10 new free trade zones – sea ports and airports which will be able to bid for freeport status which means goods brought into a freeport do not attract tariffs until they enter the domestic market and no duty is payable if they are re-exported.

This has already come under scrutiny from Labour as they believe it will only benefit the super rich and conservatives have said these will ‘produce thousands of jobs’
This is very similar plan to one of Margaret thatcher’s failed plan from the 1980s, designed to cut away at regulation.

The UK has pledged to take back control of its fishing waters after Brexit – a fresh draft of the EU’s negotiation mandate over the weekend shows major EU fishing states are looking to instruct Barnier to make fishing rights a priority.

?? EUR – The EUR continues to slide against USD, testing support levels 1.09. lack of data to support the Euro has made the currency come under pressure from a broadly stronger USD, as the outbreak of the Coronavirus favours safe-haven currencies.

Today, Christine Lagarde is meeting lawmakers and hoping to shed some light on the current conditions and ECB intentions. ECB is conducting a strategic review, with Lagarde aiming to complete for July.

The main focus for Europe will be on Thursday’s inflation data, with EUR sellers hoping to see the figure get closer to the central banks 2% target.

?? USD – The Greenback ended at 4 month highs against the Euro among virus fears and the general economic outlook favour the safe-haven currency.

Thursday will also be a big day for the USD, as inflation figures are released and expected to fall slightly to 2.2%

 

Summary:

GBP: Initial trade negotiations continue to weigh on the pound
EUR: EUR faces weakness Vs USD among lack of supporting data
USD: The Buck is broadly stronger and seems a favoured safe haven during Coronavirus outbreak

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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