Chancellor Sunak announced that the furlough scheme would be extended until October and would remain at 80% of earnings, although he also stated that companies would have to share some of the costs from the end of July.
Overall confidence in the UK outlook remained weak with further concerns that the government was finding it difficult to engage in an effective strategy to ease lockdown measures. Sterling briefly rallied against a weaker Dollar, but selling pressure increased sharply during the US session with lows at 1.2250. The Euro made sharp gains with a break above 1.1360 helping to trigger a 12-week low for Sterling at 1.12953.
GDP declined 2.0% for the first quarter of 2020 compared with market expectations of 2.5% with a year-on-year decline of 1.6%. Industrial production also fell less than expected and Sterling gained marginal relief but has since dropped slightly to 1.2270 against the Dollar.
Investors are looking towards today’s speech by Federal Reserve Chairman Jerome Powell. Market pros are waiting to hear him say the Fed has no plans for negative interest rates, after speculation rising that this could be on the agenda. President Trump tweeted yesterday that the US would benefit from negative interest rates being introduced.
Although risk-sensitive currencies are still lacking momentum there is also a focus on the repercussions of opening up the US economy too quickly keeping most exchange rates in a range-bound area.
As of writing the Dollar sits around 1.2270 against the Pound, while EURUSD starts today at the 1.0850 level.
The Euro is lacking a clear directional bias against the Dollar this Wednesday as investors take a more wait-and-see type of approach ahead of Federal Reserve Chairman Jerome Powell’s speech on economic issues.
The currency pair is largely unchanged on the day hovering around the 1.0850 mark with much indecision the current mood of the market.
The Eurozone Industrial Production data for March, scheduled for release this morning, could turn out to be a non-event for the EUR pairs, with the data being pre-lockdown. ECB policymaker Lane is also due to speak later this morning which could also influence the direction of the Euro.
Data to watch
06:00 - GBP - Prelim GDP
06:00 - GBP - GDP
06:02 - GBP - Manufacturing Production
12:30 - USD - Core PPI
12:30 - USD - PPI
13:00 - USD - Fed Chair Powell Speaks
Posted in Daily Market News on May 13 2020