The pound struck higher yesterday, rallying after the UK government outlined its new tier based coronavirus restriction system.
Meanwhile, trade in Sterling is a little mixed this morning, with GBP/EUR flat at €1.1059 and GBP/USD retreating to $1.3029. GBP/CAD is subdued at C$1.7104, while GBP/AUD and GBP/NZD hold steady at AU$1.8157 and NZ$1.9600, respectively.
Top of the agenda today will be the UK’s latest jobs report. Will a rise in unemployment weaken the pound or will the currency remain in a holding pattern ahead of this week’s Brexit deadline?
What’s been happening?
The pound enjoyed some modest gains at the start of this week’s session as Boris Johnson announced a new tier based coronavirus restriction system.
Sterling sentiment appeared to be driven by relief that most areas of the UK would avoid the strictest level of restrictions, with only Liverpool placed on ‘very high’ Covid Alert.
However, most important for GBP investors was Johnson’s reassurance that the UK is not heading towards a second lockdown.
The US dollar firmed during Monday’s trading session as US stimulus talks faced another setback after House Speaker Nancy Pelosi rejected Trump’s $1.8 trillion stimulus offer over the weekend.
However the ‘Greenback’ only found limited gains due to the resulting risk-off trade amid thin holiday trade in the US dollar.
At the same time, the euro was put on the defensive yesterday as EUR investors were unnerved by the prospect of stricter coronavirus restrictions curtailing the Eurozone’s fragile economic recovery as many European countries struggle to contain their second wave of infections.
What’s coming up?
Turning to today, the European session was kicked off by the publication of the UK’s latest jobs figures.
August’s release reported a rise in the unemployment rate and stalling wage growth, exerting some pressure on the pound this morning.
However, with the overwhelming focus for GBP investors being on Brexit as the government’s 15 October deadline looms, could the impact of the jobs figures prove limited?
For EUR investors the spotlight will be on the latest ZEW surveys, where Europe’s coronavirus resurgence could have caused economic sentiment in Germany and the wider Eurozone to have deteriorated this month.
Finally, the publication of the latest US consumer price index could offer some support to the US dollar later this afternoon on the expectation that inflation will have ticked higher again in September.
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