Sterling had a net positive start to the new week, but pulled back from the gains thanks to a big shift in global risk sentiment.
This was sparked by updated negative economic outlooks, fears of a resurgence in coronavirus cases around the world, and further Brexit talks uncertainty to add pressure on the British pound.
United Kingdom Headlines and Economic data
Up until this session, the British pound was a net winner as it fell only against the Swiss franc and Japanese yen. During the U.S. session, global risk sentiment shifted more negative after a dovish Fed outlook on the economy, sending GBP lower against the Greenback and the euro as well for an eventual net negative performance by the end of the Thursday session.
Sterling’s performance divergence continued into the Thursday session off of the FOMC event. Negative global risk sentiment accelerated during the U.S. session, likely on fears of a second wave (Florida Reports Highest Daily Increase in Coronavirus Cases Since Outbreak Began) are added on top of the Fed’s dismal outlook to worry about.
Positive global risk sentiment recovers during the Asia and London trading sessions (possibly profit-taking?) to send GBP higher against the low-yielders / lower against the comdolls, but sentiment swung back to negative later prompting to lead the pound lower against the safe havens into the end of the session.
The risk reversal was likely on fears of a second wave and a re-implementation of lockdown protocols (CDC warns U.S. may reimplement strict coronavirus measures if cases go up ‘dramatically’).