Brexit uncertainty may push the EUR/GBP towards 0.92 levels.
The UK expects its GDP quarter-on-quarter to remain unchanged at -20.4%, the same as the last quarter. The United States GDP q/q to be released on Wednesday is also expected to remain unchanged at -31.7%.
Exchange Rate Pound Dollar Strengthens with FM Rishi Sunak’s Rescue Plan
The GBP/USD is showing some strength after UK Finance Minister Rishi Sunak laid out a rescue plan to support businesses and jobs. The coronavirus resurgence is another factor that is raising concern this winter.
According to the Jobs Support Scheme announced, the government would subsidize employees’ pay. Even though people are working for fewer hours due to low demand, they would get the pay for the hours worked and get two-third of wages lost from the government.
If BoE brings interest rates t negative, it will charge for deposits held in the bank. It will encourage bank lending to businesses. However, BoE Andrew Bailey has played down this idea of bringing in negative interest rates.
Bank of England policymaker Silvana Tenreyro said on Tuesday that it would take interest rates below zero if needed. The Bank of England has cut interest rates to 0.1% currently. The economic downturn has to improve if interest rates are to remain steady.
The exchange rate Pound Dollar closed at 1.2745 on Friday, 28 September. The Sterling waits for Brexit updates to seek the next directional move.
The 1.2800 figure mark continues to provide strong resistance to the exchange rate Pound Dollar. It has dropped 1.35% last week, due to the resurging coronavirus resurgence.
USD/JPY Currency Pair at Week’s High
The Japanese Yen closed at 105.60 on Friday, 25 September. The US Dollar has been in the green last week against the Japanese Yen. If the Yen breaks past 106.00 levels, it would see further upside in the short-term.
The GBP/JPY pair has also seen an up move closing at 134.59 last week. The British Pound to the Japanese Yen has slid from 143.00 levels, which it reached on Sept 1 and is currently trading near the month’s low at 134 levels. Investors expect the GBP/JPY pair to take support at its two-month lows, which is at 133.00 levels.
US Dollar Continues to Pick Up Strength
US job data will bring in more volatility this week, especially as the Republican and Democratic leaders will be facing each other.
With the pandemic infections resurging, an economic slowdown is expected to affect global countries again. Risk-averse investors seek safe-haven investments, which is driving the US Dollar Index higher.
A $2.2 trillion stimulus package that was stalled shows signs of reviving and this may boost the faltering economy. The rising US Dollar has made the yellow metal weaker. Gold and silver prices fall for the fourth day, as prices have come down.
The US non-farm payroll data is expected this week. Experts predict an outperformance from 428K to 650K.
In Canada, the month-on-month GDP is expected to shrink to 2.9% against the previous month’s data at 6.5%.
Investors Moving from Euro to US Dollar
The resurgence of the coronavirus pandemic is wiping away the economic recovery that took place recently in the Eurozone. Inflation will remain a growing concern, says Chief Economist Philip Lane of European Central Bank.
EURGBP currency pair closed at 0.9122 on Friday, 25 September. The Brexit uncertainty may push the EUR/GBP exchange rate further to 0.92 levels in the days to come.
In the EUR/USD daily outlook, we see that the EUR/USD pair has broken below the 1.17 levels. It closed at 1.1630 on Friday, 25 September. 1.15 levels are expected to offer support, beyond which the EURUSD currency rate is expected to improve. The euro exchange rate is strengthening, and this is a cause of worry to the Eurozone, says Ignazio Visco, ECB policymaker.
The euro started the month with 1.2012 on Sep 1, but closed at 1.1630 on Friday 25 September. The resurgence of coronavirus cases in the Eurozone hurts the economy.
EVB President Christian Lagarde says that the ECB will target the exchange rate. The euro went up to touch one-week high against the greenback on Thursday after the statement. The strength in the euro is, however, hurting the economy as it is export-dependent.
The weekly outlook on the Euro FX rate will depend on some data to be released this week. The German Unemployment Change is expected to go lower too -7K, against the previous data at -9K. The Unemployment Rate in the Eurozone is expected to rise from 7.9% to 8.1%, from the data expected on Thursday.
Manufacturing PMI is expected this week from the Eurozone. In Italy, it is expected at 53.6 against 53.1, Spanish Manufacturing PMI is expected to improve from 49.9 to 50.5, German Final Manufacturing PMI is expected to remain the same at 56.5, and French Manufacturing PMI is also expected to remain the same at 56.6.