Not a lot of action for Sterling this week as volatility remained low and the overall performance was mixed. Without a major catalyst, it looks like pound traders moved more with broad risk sentiment over the negative economic updates from the U.K.
United Kingdom Headlines and Economic data
Generally a positive session for the pound, likely benefiting from positive global risk sentiment vibes after data releases from China showed improvement (China July Consumer Inflation Picks Up Amid Flood Disruption, China’s factory deflation slows in July as recovery gains strength)
After Sterling’s bounce sparked by the morning’s U.K. data update, pound traders took the market lower against the safe havens during the U.S. session. This was likely related to broad risk sentiment flipping back to negative, likely driven by U.S. stimulus uncertainty and net negative updates from the U.S. (U.S. bankruptcies on track for 10-year high with more than 100 consumer companies already filing, U.S. small business optimism falls in July)
The broad move lower in the pound correlated with the news that the UK entered recession after GDP plunged by a record 20.4% in the second quarter
Sterling rebounded, starting during the Asia session, likely on broad risk sentiment moving positive. This may have been sparked by a string of positive economic updates from around the globe, including an improvement in Australia employment situation, UK’s housing market booms, and U.S. initial claims falling below 1M for the first time since the economy crashed in March.
No major geopolitical headlines or economic updates from the U.K. on Friday, so it’s likely the bounce in Sterling came from positive pandemic-related news (UK signs deals for 90 million virus vaccine doses) and/or counter currency weakness as broad risk sentiment flipped negative ahead of the weekend (U.S. Congress fails to strike a deal on a new U.S. stimulus package, and possibly on low confidence that the recent rebound in economic activity is sustainable given the spike in coronavirus cases around the world).