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Sterling Steady After Recent Demise

Sterling Steady After Recent Demise

GBP

The CBI retail sales index strengthened to 11 for September from -6 previously and above consensus forecasts of -10, although retailers expect a flat performance for October. UK consumer confidence secured a marginal advance to -25 for September from -27 previously, maintaining reservations over the outlook.

Chancellor Sunak introduced his job-support package to replace the current furlough scheme which ends in October and also announced an extension of the VAT cuts for the hospitality and tourism industries. Concerns are still somewhat high over labour-market trends alongside government borrowing requirements increasing to £35.9bn with the debt/GDP ratio at 101.9%, the highest figure since 1961.

The UK reported over 6,600 coronavirus cases in the latest 24 hour period, the highest daily increase on record and reinforcing concerns that there will be significant damage to the economic recovery. Sterling was underpinned by firmer risk conditions with a move to 1.2780 against the Dollar and 1.0970 against the Euro. 

 

USD

US initial jobless claims increased to 870,000 for the latest week from a revised 866,000 the previous week and above market expectations of 840,000. Continuing claims declined to 12.58mn from 12.75mn previously. There was a sharp decline in the number of claims under the pandemic assistance programme. The data overall maintained some reservations over the employment outlook, especially with initial claims still running at very high levels.

Federal Reserve (Fed) Chair Powell stated that there are downside risks to the economy if there is no further government support. This has been a persistent theme from Fed officials during the past month with sustained pressure for more Federal support. The message was repeated by Chicago head Evans who again called for more fiscal relief. He also commented that an inclusive recovery is difficult until there is sufficient progress in controlling the coronavirus outbreak.

There are market concerns that the Fed is effectively out of ammunition in providing economic support.

 

EUR

The German IFO business confidence index improved to 93.4 for September from 92.5 previously, although below consensus forecasts of 93.8. There were smaller than expected gains in the current conditions and business expectations components.

The Euro slumped to its lowest level in two months to the 1.1626 on Thursday but reversed its direction in the late American session. There were also further concerns over coronavirus developments with EU officials warning that there is the risk of a deadly double flu and coronavirus epidemic.

As of writing, the Euro currently trades around the 1.1675 mark against its US counterpart. 

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