Concerns UK will lag behind
A government spokesman reported that the government intends to re-open non-essential retail outlets from June 15th with restaurants and cafes opening July 4th. The signalling that the economy was re-opening provided an element of Sterling support but concerns remained that the UK would lag behind other European economies which limited the gains. Sterling also benefited from expectations of a recovery in the global economy, especially with commodity currencies banking net gains.The Pound attracted selling interest above 1.2700 on the US Dollar and dipped below 1.2650 before a strong rebound while the Euro edged just below 1.1235.
Bank of England chief economist Andy Haldane stated that economic activity has collapsed and that the unprecedented level of inactivity in the labour market was due to furloughed staff and redundancies. The Pound suffered no obvious reaction to the comments and held firm. Overnight BRC data recorded a like-for-like annual increase in retail sales of 7.9%, but overall sales declined by 5.9%. Sterling attempted another assault on the 1.2730 mark before retreating to near 1.2700 amid a slightly more cautious tone in global markets with the Euro hovering around 1.1255.
The US dollar attempted to extend the correction seen after Friday’s employment data but failed with the dollar hampered by fresh gains across the commodity currency complex. Overall trading was subdued with a lack of fresh market incentives.
There was an element of caution ahead of Wednesday’s Federal Reserve policy meeting with markets waiting for fresh guidance from the central bank. There are expectations of slightly less dovish Fed rhetoric.
According to sources, the German government will meet on Friday to discuss the implementation of the EUR130bn stimulus package including a temporary cut in VAT and incentives for retail spending. Markets will also monitor political rhetoric ahead of Thursday’s important Eurogroup meeting.
The Euro-zone Sentix investor recovered to -24.8 for June from -41.8 previously, although this was slightly below consensus forecasts.
The Euro edged lower during the European session with a retreat to the 1.1270 area as the US dollar also attempted to extend the correction seen after Friday’s employment data. Overall trading was subdued with a lack of fresh market incentives. As of writing the Euro is still trading around the 1.1270 mark against the Dollar.