Business Currency News: Pound tumbles on BoE stimulus announcement, US Dollar Supported by Second Wave Fears

GBP/EUR Exchange Rate: Sterling Slumps on BoE Stimulus Announcement

The Pound to Euro (GBP/EUR) exchange rate has fallen over a cent through the past week, mostly in response to the Bank of England’s (BoE) policy decision last Thursday.

While keeping interest rate unchanged, the BoE announced that it would be expanding its quantitative easing programme by £100bn, but slow the pace of its bond purchases.

This resulted in a sharp sell off of Sterling, amid speculation the BoE will come under pressure to ease its policy further in light of the challenges facing the UK economy, something which investor fear ‘will fuel discussion of negative interest rates’.

The bearish attitude towards the Pound carried through into this week’s session as well, leaving the GBP/EUR exchange rate stuck close to a two-month low.

Looking ahead, it looks likely Brexit will be back in focus for GBP investors in the coming week as accelerated summer talks are set to begin.

Boris Johnson is optimistic a trade deal can be reached in July with a ‘bit of oomph’, but with the UK and EU still at loggerheads on a number of key issues, GBP investors may be left disappointed by a lack of progress.

GBP/USD Exchange Rate: Pound Finds Fleeting Gains as UK Eases Lockdown Measures

The GBP/USD exchange rate traded in a wide range over the past week, with the Pound making some short-lived gains after the UK government announced more of the economy will be able to reopen from next month.

Boris Johnson announced Restaurants, pubs, cinemas and hairdressers will be allowed to open their doors from 4 July, with the 2m distancing rule being eased to ‘one-metre plus’.

While GBP investors welcomed the news, the upside in the GBP/USD exchange rate was quickly reversed amidst warnings from UK health experts that the UK must prepare for a second wave of coronavirus infections as the country begins to open back up.

Going forward, GBP investors are likely to keep a close eye on the UK’s coronavirus statistics, as any spike in cases could see the government re-impose lockdown and reverse the economic recovery we have seen since April’s record downturn.

USD/GBP Exchange Rate: US Dollar Fluctuates on Mixed Market Sentiment

The USD/GBP exchange rate jumped through the second half of last week as growing concerns of a second wave of coronavirus infections bolstered demand for the safe-haven US Dollar.

These gains quickly began to fade through the first half of this week, as market sentiment picked back up as investors expressed relief that the US-China trade deal signed back in January had not been scrapped.

However, the upbeat market mood failed to last, with a spike in US coronavirus cases and threats of a transatlantic trade war both sending investors flocking back to the ‘Greenback’ on Wednesday.

Still to come this week is the release of the latest US durable goods figures. Will a solid rebound in goods orders last month help the US Dollar to maintain its upward trajectory?

EUR/USD Exchange Rate: Euro Bolstered by Improving PMI Figures

The EUR/USD exchange rate ticked higher over the past week, strengthening mostly on the back of some better-than-expected PMI figures released on Tuesday.

The latest PMI indexes revealed that while economic activity in the Eurozone fell just short of growth this month, there is a good chance that the private sector will begin to expand again in the third quarter.

However, the EUR/USD began to relinquish a good portion of these gains through the middle of the week, following reports that the White House is preparing to impose import tariffs on $3.1bn worth of EU goods.

Looking ahead, the Eurozone’s latest business confidence figures may offer some support to the Euro next week, if economic sentiment showed a notable improvement in June.

However, any upside in the single currency could prove limited if the Eurozone’s CPI figures report the bloc fell deeper into deflation this month.

Matthew Andrews

Contact Matthew Andrews