Pound rallies as markets welcome the UK’s new stimulus package

  • Pound rallies as markets welcome the UK’s new stimulus package


    The past couple of weeks have seen a notable recovery in the pound, in response to an improving market mood and the announcement of a new UK stimulus package.

    During this time, we’ve seen GBP/EUR climb from €1.09 to €1.10 and EUR/GBP slide to £0.90.

    Meanwhile, GBP/USD has surged from $1.22 to $1.25, whilst EUR/USD has strengthened from $1.12 to $1.13. 

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    What’s been happening?

    So far in July we have seen the pound pull itself out of the doldrums, rising on the back of improving market sentiment as well as Rishi Sunak unveiling a new £30bn stimulus package aimed at protecting jobs.

    However, this upside in Sterling has come with some hurdles as GBP gains were tempered by the lack of progress in Brexit trade talks.

    The euro, meanwhile, has also ticked higher over the past couple of weeks, supported by some positive data indicating the Eurozone is on the road to recovery. 

    On the other hand, July has not been good to the US dollar so far, as the more positive market mood has undermined demand for the safe-haven currency.

    What do you need to look out for? 

    Looking ahead, we may see the pound struggle to extend its recovery through the remainder of July so long as the Brexit deadlock continues.

    For the euro, any upside in the second half of July is likely dependent on EU leaders reaching an agreement on the EU’s coronavirus recovery fund. The failure to do so is likely to leave the single currency on the back foot against its peers.

    Finally, the US dollar is likely to remain highly sensitive to coronavirus developments going forward, potentially strengthening in the coming weeks if cases in the US and other countries continue to spike.


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