High beta currencies continue to underperform in the market this week. The Pound Exchange Rate continues to be on the backfoot for the short-term.
Volatility continues to surge with traders struggling against the spike in Covid-19 infections. Though monetary support favours a robust recovery in the exchange rate and economy, investors continue to remain wary of the economic scenario.
The Pound to euro currency rate for the week ended 10 June closed at 1.1171. It rose to touch highs of 1.1191 intraday.
The GBP/USD currency rate closed last week at 1.1256.
The European Council Meeting is to take place on Thursday and Friday. A recovery plan proposal is to be discussed here. Further, a new EU budget for the long term will also be agreed upon and will decide the market trend.
GBP/USD Exchange Rate Recovers
The Pound has recovered over the past week against the euro and the US dollar with a positive movement. The GBP/USD exchange rate has been trading between 1.2669 and 1.2459 the week – 6 July and 10 July. The pair bounced from the lows of 1.2251 that it saw on 29 June.
After another bout of weakness in the greenback, the GBP/USD has been trading higher. If the bulls take full control, the pair will push past resistance level of 1.2669, after which it may move towards 1.2814.
However, if the GBP/USD foreign exchange rate breaks down, it has a support level at 1.2566 and another support at 1.2251. The Relative Strength Index is above 50. If it breaks higher, it may come into the overbought zone again.
The pound sterling is seeing some optimistic outcomes from the trade talks between the United Kingdom and the Eurozone.
Further, UK Chancellor Rishi Sunak has outlined some extensive measures to improve the economy. On Wednesday, he made important changes to the stamp duty imposed. Incentives have been provided to furloughed workers and customers are now freed from the curfew imposed on the economy.
GBP/EUR Marching Steadily Ahead
The GBP/EUR currency pair closed at 1.1170 for the week ended 10 July.
If the Pound to euro exchange rate breaks past 1.1191, it may reach targets of 1.1283. Trade talks have brought a positive sentiment in the market and may help to fuel pound strength.
However, if the currency rate falls below 1.1109, the pair will weaken. It will find support at 1.1040 and further at 1.0894 for the short term.
Uncertainty of a no-deal Brexit was driving Sterling lower continually. The Sterling is in oversold territory and a recovery is expected.
Fear of Covid-19 rebounding again is one factor that continues to keep the economic outlook guessing. The currency market is seeing volatile movements from the COVID data as it suddenly resurges in various parts of the country.
The UK economy is easing restrictions on its economy. Consumers are allowed to eat out, and outdoor sports have opened. With such easing, consumer spending is expected to grow in the weeks ahead.
The week ahead is filled with data releases in the United Kingdom. The UK GDP is to be released on Tuesday. In April, it saw a fall of 20.4 %.
Any sign that the economic data is good, will set the Pound rising. The GBP/EUR pair is on an uphill move from 1.0894, which the pair touched on 29 June.
Initiatives have been mentioned from the Bank of England, which is expected to bring in some positive sentiment into the currency market.
Busy Calendar Week
Talks between the UK and the EU will continue throughout this month. The Pound performs well whenever a deal is within sight and a significant move is expected to keep the Pound strong.
The United Kingdom and Turkey may clinch a trade deal soon. Turkish Foreign Minister Mevlut Cavusoglu says â€śtalks progressing wellâ€ť.
On Monday, Bank of England Governor Andrew Bailey will be making a statement on the future policy, which will set the trend for the sterling this week.
On Tuesday, the UK GDP is to be released. The May economic data will be keenly watched by analysts, as it will show how companies are performing after the lockdown. The forecast is at 5.0%, while the previous rate was at -20.4%.
In the US, as per the numbers released recently, the non-farm payroll numbers have shown good improvement. The labour market seems to have strengthened with 4.8 million jobs created in June, against that of 2.7 million jobs in May.
The European Union continues to struggle with its worst recession since the great depression. ECB rates to be released on Thursday for the Euro-Area. European leaders will be deciding fiscal stimulus plans, though it faces opposition from a few countries.
A pandemic emergency purchase program of 600 billion euros has been introduced by the ECB President Christine Lagarde. Further action can be expected from the ECB president on the execution of the PEPP fund.
Latest AUD/USD Currency Rate Forecast
The AUD/USD currency pair closed at 0.6949 for the week of 10 July. It is reaching towards the two-months high of 0.7063. If the currency rate moves past 0.6970 levels it will touch levels of 0.7002. It is a crucial resistance and if this level is crossed, it will move to 0.7063. It has strong support at 0.6923 and 0.6832.
AUD/USD pair will be gearing for high currency volatility. Labour market data and consumer confidence data will be released in the week ahead.
- GBP Foreign Exchange Rate Showing Strong Performance - August 3, 2020
- Euro Currency Rate Reflects A Strengthening Euro Zone - July 30, 2020
- British Pound Foreign Exchange Rates Run into Troubled Waters - July 27, 2020