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Sterling Rebounds as Government Extends Furlough Scheme

Pound News: UK GDP Contracts by Record -5.8% as Coronavirus Hits

Sterling exchange rates recovered slightly this morning, although the British currency remained largely vulnerable as investors weighed up the high costs of the government’s furlough scheme. Boris Johnson’s government announced on Tuesday the job retention scheme would be extended to October, offering GBP support.

Meanwhile, data released earlier today showed the economy shrank by a record -5.8% in March due to the coronavirus crisis. Added to this, data revealed growth contracted by -2%, making this the steepest quarter-on-quarter decline since the end of 2008.

Looking ahead, the Pound could remain on the back foot as traders become increasingly concerned with the high costs associated with the government’s plans to support the economy.

Pound Euro News: Eurozone Industrial Production Suffers Steepest Fall on Record

The Pound remained flat against the Euro on Wednesday after data revealed the Eurozone’s industrial production sector suffered its steepest monthly fall on record.

Coronavirus lockdown measures severely impacted industrial activity across the bloc, causing production to plummet by -11.3% in March. Also, Activity is expected to decline at a faster pace in April as the bloc spent the whole month in lockdown.

Looking ahead to Thursday, the single currency could edge lower following the release of German inflation data. If the bloc’s largest economy reveals the country’s inflation rate has plummeted below the Bundesbank’s target, EUR will fall.

Pound US Dollar News: Will the Fed Consider Negative Rates?

The US Dollar edged lower against the Pound today ahead of US Federal Reserve Chair, Jerome Powell’s speech. USD fell despite growing speculation the bank may introduce negative interest rates to fight the coronavirus crisis.

While policymakers have spoken against the introduction of negative rates, President Donald Trump has pushed the central bank once again to adopt negative rates. According to Antje Praefcke, Commerzbank strategist:

‘If push comes to shove, the Fed would of course consider negative interest rates, too, but they are likely going to be on the bottom of the Fed’s list of possible options when it comes to supporting the financial system or the economy further.’

Looking ahead, traders will look for signs the number of Americans out of work has stabilised. If last week’s initial jobless claims do not rise as high as expected, it could boost risk sentiment and weigh on the safe-haven ‘Greenback’.

Pound Canadian Dollar News: Coronavirus Second Wave Weighs on Oil Prices

The Pound Canadian Dollar exchange rate remained flat on Wednesday after oil prices slumped as plans to deepen supply cuts were offset by demand concerns while markets worried about a potential second wave of coronavirus infections.

According to oil brokerage PVM’s Stephen Brennoc:

‘Fears are running rife that easing lockdown measures will trigger a second wave of coronavirus infections.’

Looking ahead, the ‘Loonie’ could suffer further losses on Thursday following the release of March’s manufacturing sales. If sales plummet further than forecast, it will send the Canadian Dollar lower.

Pound Australian Dollar News: Markets Await Aussie Unemployment Rate

The Australian Dollar slumped against the Pound today despite data revealing that Aussie consumer confidence edged higher in May. Westpac’s data revealed confidence rose 16.4% from 75.6 in April to 88.1 in May.

However, growing speculation the US Federal Reserve could take interest rates into negative territory weighed on the risk-sensitive ‘Aussie’.

Looking ahead, traders will focus on Australia’s labour market statistics on Thursday. If the country’s unemployment rate drops further than expected, towards the lowest level in over 20 years due to the coronavirus crisis, AUD will slide.

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