The Chancellor’s rescue package allowed Sterling to make gains on it’s peers yesterday as markets assumed it would lessen the risks of a fresh downturn in the UK economy. Risk appetite held firm and the Pound strengthened to around 1.2670 on the Dollar and the 1.1170 area against the Euro. The latest round of EU/UK talks prompted EU chief negotiator Michel Barnier to state that there were still significant divergences between the two sides but that he would continue to work with patience, respect and determination. The market impact was as recent evidence which suggested that there was scope for compromise took precedence. Talks will continue next week in Brussels with rhetoric monitored very closely.
Sterling edged lower as risk appetite dipped and the Dollar regained ground. The government announced that the leisure sector would benefit from further easing of lockdown restrictions on Friday. The Euro settled around 1.1173 while a firmer Dollar pushed Sterling back below 1.2600 this morning.
US initial jobless claims declined to 1.31mn in the latest week from 1.41mn previously which was below consensus forecasts of 1.40mn and the lowest reading for 15 weeks. Continuing claims also declined sharply, but there was an increase in both metrics when the number of employees on emergency Federal programmes is added in.
The data maintained underlying market uncertainty over underlying labour-market trends and contributed to overall uncertainty surrounding overall dollar sentiment.
The Euro was unable to secure further gains ahead of yesterday’s US open and retreated back down below the 1.1350 mark as further German export data disappointed. There was also no evidence of a progress towards any agreement on the EU recovery fund which limited overall Euro support.
Overall confidence in the Euro-area remains cagey with uncertainty dominating. That being said, the common currency could pick up a bids if the Eurozone EcoFin Meeting, running throughout today, ends on a positive note with the finance ministers moving closer to fiscal integration.
Data to watch
12:30 - USD - Core PPI
12:30 - USD - PPI
Posted in Daily Market News on Jul 10 2020