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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.

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart
GBP Weekly Performance from MarketMilk
GBP Weekly Performance from MarketMilk

United Kingdom Headlines and Economic data

Tuesday:

U.K. BRC retail sales monitor up from 5.7% to 7.9% vs. 3.0% forecast

Johnson Continues U.K. Lockdown Easing But Retreats on Schools

London Reports No Virus Deaths for the First Time Under Lockdown

UK says it will not budge on fishing rights in Brexit talks

UK says demand for COVID loans hits nearly 35 billion pounds

BoE’s Cunliffe sees ‘great deal of pain’ for financial sector

Wednesday:

Britain asks too much of EU in Brexit talks, Barnier says

BoE’s Bailey sees some signs of recovery from lockdown

Boris Johnson will not ask for extension to Brexit transition period

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.

Thursday:

U.K. RICS house price balance down 32% vs. projected 24% drop

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.

Friday:

Brexit: UK drops plans for full border checks on goods from EU

UK economy contracted by 20.4% in April, the largest monthly fall on record

UK delays post-Brexit border checks as virus slams economy

UK consumer inflation expectations survey: 2.9% vs. 3.0% previous

The total UK trade balance, decreased by £3.2B to a deficit of £1.2B in the three months to April 2020

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’).