The British Pound
GBP/USD has suffered from insufficient BOE support and coronavirus concerns.
Preliminary UK PMIs, US investment and consumption figures, and coronavirus developments are eyed.
Mid-June's daily chart is showing bears are gaining some ground.
The FX Poll shows experts are bearish in the short and medium terms.
Bailey has bailed out – the insufficient central bank support has weighed on the pound and rising coronavirus cases in the US boosted the safe-haven dollar. Apart from disease data, forward-looking UK figures, and hard US statics are eyed.
This week in GBP/USD: BOE blow, coronavirus comeback
Andre Bailey, Governor of the BoE, seems to have hit the brakes. While the BOE topped up its bond-buying scheme with an additional £100 billion, investors wanted more support. Moreover, the slower purchase pace hinted by the bank also weighed on the pound.Brexit tiger in the tank: Prime Minister Boris Johnson expressed optimism after holding a videoconference with top EU officials. Talks about future relations between the UK and the bloc will restart with format changes and new hopes for a deal. That gave the pound a boost.
However, Germany reportedly expects negotiations to heat up only in September, leaving limited time to clinch an accord before year-end, when the transition period expires. Without an agreement, British companies will find themselves trading at unfavorable World Trade Organization terms.
The UK coronavirus curve continues edging lower, and the government eased the lockdown, with non-essential shops now open to the public. On the other hand, incoming passengers are required to quarantine for 14 days – all but killing the tourism industry. The pound lagged behind some of its peers.
Economic figures were mixed. While the Unemployment Rate remained low at 3.9% in April, jobless claims disappointed with an increase of over 500,000 in May, worse than expected. Headline inflation fell to 0.5% yearly, as expected, but signaling economic weakness.
On the other side of the pond, data was mostly positive. The consumer-centric US economy enjoyed a leap of 17.7% in May's Retail Sales, leaving hope for those seeking to see a V-shaped recovery. Housing Starts remained below one million annualized, yet markets ignored the release. Weekly US jobless claims stabilized around 1.5 million.
Chairman of the Federal Reserve, poured some cold water by striking a more cautious tone. While he seemed encouraged by the expenditure data, he repeated his warning that a return to pre-pandemic output may have to wait until the health issues are resolved.
Coronavirus continued worrying investors, as cases and hospitalizations continue accelerating their increase in several southern states such as Florida, Texas, and Arizona. The concerning developments in the south are countered by the ongoing improvement in the greater New York area. The former hotspot continues its gradual return to normal.Circling back to Britain, researchers at Oxford University proved that a cheap steroid reduced mortality from the disease. That will not have the effect of a vaccine but certainly sounds promising.
UK events: Crushing the curve and PMIs
Brexit talks resume only on June 29, so that should provide a potential break from the saga, yet any significant statement by Johnson or others could rock the pound.
UK coronavirus statistics remain central to the pound, as they indicate the path forward for the reopening – including the 14-day quarantine requirement. Investors will likely ignore figures published on Monday when the "weekend effect" is most pronounced. Figures on other days and new government measures are of interest.
The economic calendar features Markit's forward-looking Purchasing Managers' Indexes for June. The manufacturing sector suffered less and may extend its recovery closer to the 50-point threshold separating expansion from contraction. The services sector is still struggling and had a score of 29 in May. It is also likely to rise.