By Matthew Vassallo
The Pound’s recent run seems to have lost some momentum, as GBP failed to make any significant gains against the EUR last week. Whilst trading levels against the single currency remain under a cent away from the recent 18-month highs, Sterling’s struggles against the USD highlighted the market’s growing concerns over the current Brexit risks. With the UK and France locked in increasingly hostile talks over fishing rights in the English Channel, the ongoing row serves as a timely reminder of the potential pitfalls the UK is likely to face in its post Brexit economy.
Whilst the USD is showing signs of a bounce back to pre-Covid levels against GBP, concerns over a downturn in the US’s key Industrial & Manufacturing sectors may help curb any significant downturn for the Pound in the short term.
Investors first seemed to shy away from their continued buy up of GBP following last Wednesday’s budget, in which the Chancellor outlined the UK government’s ‘post’ Covid economic strategy.
With the inevitable tax increases being spread, somewhat surprisingly, evenly across both the UK’s private and public sector work forces, union delegates have been quick to jump on what some may perceive as an unfair distribution based on the financial impact the Chancellor’s decisions could have on lower income households in particular.
With the media’s focus currently centred on this week’s G20 summit in Glasgow, where we are likely to receive several poignant warnings from global leaders as to the severity of the current situation in regard to global warming, the growing concerns over Brexit may take a back seat over the coming days, although any potential respite is likely to be short lived.
If the global markets react to any concerns raised at the G20 this could see further support for the haven USD this week, whilst any further sanctions the Anglo/French fishing row may potentially throw up could impact GBP value against the EUR.
Looking ahead and there is a host of key economic data to look out for this week:
Monday
UK & US Manufacturing Figures + US Construction data
Tuesday
Eurozone Manufacturing PMI figures
Wednesday
UK Markit Services PMI figures
Eurozone Unemployment Rate
Thursday
UK Markit Construction PMI figures
Eurozone Market Services PMI data
Bank of England Interest Rate Decision & Monetary Policy Statement