Beyond Currency

"Over the month of July, confidence had been growing that despite the UK being the most affected European Country it may emerge from the Covid-19 Pandemic, while not unscathed, with the ability to recover more quickly than the rest of Europe and possibly the U.S.

It emerged on Friday that the Scientific Experts believe that the UK has reached the limit of its ability to move any further. That may mean a trade-off where, for example, in order for schools to reopen, pubs and or restaurants may need to close."

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Government’s manifesto for the December election and the Budget which took place before the lockdown both pledged an end to austerity. However, it has taken the most unexpected of events to ensure that austerity is finally dead and buried.

Covid-19 has taken the austerity card out of Chancellor Rishi Sunaks hand as the only way to solve the recession that is now certain to happen is for the economy to grow and that is by stimulus not penny pinching from public services.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The pound is continuing to rally against a dollar which has barely reacted to the entirely predictable Fed meeting. As the euro stalls, the pound is continuing to make ground. This is most likely due to the much larger short Sterling positions that have been being reported by the CBOT.

While it is to be expected that a post-Brexit trade deal will be competed fairly routinely with the U.S., despite talk of sell offs in the NHS and chlorinated chicken, it is deals likely to be made with other major partners, like Japan and Australia that are likely to give the pound further wind beneath its wings."

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Last week’s retail sales data was better than expected and that will have helped the Treasury's coffers to fill but with a cut to VAT and the much-vaunted hospitality bonus will slow the flow by a significant amount.

One of the thoughts rushing through the mind of the Chancellor is an online sales tax. This may serve to solve two issues. First those online retailers who are avoiding the issues of High Street rents and business rates will see part of their profit be paid to the Government, while many of the biggest retailers, Amazon are a prime (!) example, have been heavily criticised for their tax regimes.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The pound continued its recent rally last week as technical indicators continue to amount to very little as a clue to its direction.

Given the storm clouds that are gathering for the country and the economy, the pound’s rise to its current level appears unsustainable. However, it could easily extend to test the 1.30 level but having reached its highest level since the lockdown began, the Covid pandemic may have had all the effect it is going to as Brexit and the ongoing row with China prove to me more immediate concerns.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Date figures show that Manufacturing output is at its lowest level in forty years. That in itself is hardly surprising, manufacturing has been on a decline for many years since globalization has allowed firms to create, build or make goods of similar quality to what can be produced in the UK at a fraction of the cost.

One of the more significant outcomes of the pandemic, particularly if the UK’s fall out with China escalates is that as manufacturing develops and becomes less labour intensive, the cost of setting up in the UK will fall. That has already been shown in a few car companies with global brands moving production to the UK.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

The unpredictability that has pervaded the FX market over the period of the pandemic has seen risk appetite as the primary driver and the dollar has been the major respondent, the pound and single currency have trailed faithfully behind.

While the market remains unpredictable, the outlook may have changed as the rally in Sterling came to something of a halt yesterday despite the dollar’s continued fall.

Brexit, China, and the state of the economy remain the principal drivers for the pound. Each has a different time scale with the economy, the most pressing issue followed by Brexit and the long-term effect of the escalating row with China.

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"A double dip recession where the economy looks to be over the worst of its contraction only to fall back is being predicted in several quarters by analysts who fear a second spike in Covid-19 infections as well as criticising the Federal response over aid to those who are either furloughed or are having to start claiming unemployment support.

The original support package with paid $600 per week to those in need of support expires at the end of the month and while further measures are being worked on fears remain that the level of support will be significantly reduced.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"While the pound has several short-term victories, it is becoming clear that longer term investors, hedge funds and strategic traders remain bearish about the longer-term prospects for the currency. Thus, there is little follow through when bullish comments or expectations are made such as those by Bank of England Chief Economist Andrew Haldane yesterday.

Haldane’s view is that the economy is in the middle of a V-shaped recovery from the Covid-19 pandemic and has already recouped half of the fall in activity due to the lockdown."

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Although there is still an option for Chancellor Rishi Sunak to either cut public spending or raise taxes to pay for the support he has provided during the Covid-19 pandemic, it is becoming more and more certain he will opt for tax rises.

This is not a traditionally Conservative way of raising funds, it was made clear by Boris Johnson at last year’s election and Sunak’s action at the time of the Budget in March that austerity in the UK was over and a more expansive form of Capitalism will be this Governments watchword.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.