BoE – Optimistic message lifts GBP – Today’s Rates & Market News

Today’s Rates

GBP>EUR – 1.1111

GBP>USD – 1.3167

EUR>USD – 1.1846

GBP>CAD – 1.7490

GBP>AUD – 1.8327

GBP>SEK – 11.451

GBP>AED – 4.8348

GBP>HKD – 10.202

GBP>ZAR – 23.060

Today’s Calendar     

·         GBP Bank of England Monetary Policy Report

·         GBP BoE MPC Vote Unchanged

·         GBP BoE Asset Purchase Facility (Aug)

·         GBP Monetary Policy Summary

·         GBP BoE MPC Vote Cut

·         GBP Bank of England Minutes

·         GBP BoE MPC Vote Hike

·         GBP BoE Interest Rate Decision

·         GBP BoE’s Governor Bailey speech

 

Today’s Highlights

  • UK BoE Monetary policy unchanged, optimistic message lifts GBP
  • Forex Today Gold up, Dollar down amid stalled fiscal talks, vaccine hopes, all ahead of jobless claims data
  • BoE FSR UK GDP, Unemployment rate to recover, CPI may soften
  • US Dollar Index test session tops near 93.00 ahead of data.

 

(https://frank-exchange.com/)

Markets

GBP

Cable posted a new five-month peak at 1.3182, this time floated not just by dollar weakness but also by a good measure of sterling outperformance on the back of the BoE’s policy statement, which has driven EUR-GBP nearly 0.5% low to a two-day low at 0.9000. The pound has also gained about 0.5% versus the Australian dollar, and is up on the yen and other currencies, too. The gains were sparked by the BoE, which left monetary policy settings unchanged today while giving a cautiously optimistic take on the outlook, stating that the lockdown-induced downturn is less severe than initially foreseen. While the statement highlighted the likely sharp decline in Q2 activity levels, with GDP seen down around -20% y/y, it also noted the rebound in more timely higher-frequency indicators and a pick-up in housing market activity and said that it expects a rebound, albeit gradual, in business investment. The BoE still cautioned that the unemployment rate is projected “to rise materially, to around 7.5% by the end of the year.” The central bank stated that it remains committed not to tighten policy “until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”. The warily more upbeat BoE comes to the forex markets factoring better odds for an EU-UK trade deal, with several recent sourced UK press reports suggesting that discussions are going better than the official line suggests. There is now summer a hiatus in negotiations, which will resume on the week of August 17th. The final round of discussions is set for the week commencing October 2nd. Market narratives have also been noting a pick-up in the pace of economic recovery in the UK, as confirmed by July PMI data, though the new lockdown in the economically-important Manchester area, and the continued media-driven “feardemic,” is to an extent clouding the outlook at a time when government pandemic business support measures have started to unwind (compensation for furloughed workers was reduced this week).

World

The USD index edged out a fresh 27-month low at 96.53, continuing what is a fourth consecutive week of decline and a fourth straight month of decline, dropping by just over 10% from the early March peak. The loss of confidence in the U.S. currency has partly been reflected in the ongoing rally in gold, which has remained buoyant after posting a fresh record nominal high at $2,057.50 yesterday. A deal on the U.S. fiscal package remains elusive, though President Trump’s threat to take executive action to cut payroll taxes managed to keep investor spirits up, along with the above- forecast services ISM out of the U.S., and more positive news from the candidate vaccine front for the SARS Cov-2 coronavirus. The good vibe across equity markets flagged somewhat as the Asia session wore on, however. The MSCI Asia-Pacific equity index printed a six-and-a-half-month-high during early trading before turning lower to near net unchanged levels. S&P 500 futures, while off highs, still showed moderate gains. AUD-USD saw a downward flurry after the Australian government lifted its unemployment forecast while forecasting growth would be trimmed by 2.5 percentage points as a consequence of its lockdown measures (having chosen the sledgehammer approach, similar to many other nations, despite the standout success of the much less costly Swedish approach, which has refrained from lockdown and masks and has performed near the same as most other European countries during the pandemic, with its ICU and mortality numbers have now dropped to near nothing). AUD-USD dipped to a 0.7184 low, which is nearly 60 pips below yesterday’s peak. Elsewhere, EUR-USD edged out a new 27-month high at 1.1917, and Cable a five-month peak at 1.3182. USD-JPY idled in the mid-105.00s, above yesterday’s six-day low at 105.32. USD-CAD settled above the six-month low seen yesterday at 1.3231. Front-month WTI crude futures settled in the lower $42.0s, below Wednesday’s five-month peak at $43.52.

XE Market Analysis Europe – 5th Aug 2020

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