01/06/2020

Brexit fears weigh on the pound


GBP

The pound finished last week subdued as Brexit trade talks continued to weigh on the currency. As we enter June, the clock continues to tick on a transition period and no signs of progress have yet been made, and it is increasingly unlikely that we will see an extension agreed before the month end. This lack of progress has meant traders have had to price in the likelihood of a no-deal scenario.

We also saw Bank of England member Andy Haldane quash the rumours of impending negative interest rates, saying that the central bank is not close to implementing negative rates. The market is now bracing itself for the reaction to coronavirus restrictions being tentatively lifted in the UK today and whether it will be enough to raise spirits.

EUR

The euro continued its strong run on Friday after the European Commission announced its stimulus plan earlier in the week. The 750 billion euro recovery fund has lifted optimism and coincided with investors’ improved appetite for risk taking, as economies are beginning to reopen after lockdown.

The euro was also boosted by inflation data which despite displaying a continued slowing, showed that underlying price growth was holding steady. This is a positive sign in the ECB’s attempts to starve off deflation.

Key announcements

15:00 – USD – ISM Manufacturing Employment Index (May); expected to increase to 35 from previous 28.5
15:00 – USD – ISM Manufacturing PMI (May); expected to increase to 43 from previous 41.5


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