Sterling higher, but not on sentiment

Daily Currency Update

GBP - British PoundUK GDP data did little to help the falling pound yesterday morning with the final q/q figure coming in worse than expected. The early news saw the pound drop to 1.2260 versus the US dollar and 1.0935 against the euro. Prime Minister Boris Johnson announced a plan to fast-track GBP 5 billion of infrastructure investment and slash property planning rules to revive the UK economy. The news was expected and had little impact on the pound as many believe it is too low a figure when taking into consideration the increase in recent government intervention/stimulus to aid the UK recovery from the pandemic. So, why did the pound go on to recover yesterday with worries of a no deal Brexit, weaker than expected data releases, and concerns that further lockdown easing may cause a similar flare-up recently seen in Leicester? It seems to point to end-of-quarter re-balancing rather than any positive sentiment. Sterling gains would have also been supported by MPC member Andy Haldane’s comments regarding a V shaped recovery. Sterling, from the early lows, saw a session high of 1.2400 against the US dollar and 1.1040 against the euro overnight.This morning we have already seen a low impact data released from the UK. Nationwide building society gave an update on the selling prices of homes. No surprises that the figure was worse than expected seeing a -1.4% figure versus -0.6% expected. Shortly, we are expecting to see whether UK manufacturing has expanded with a forecast of 50.2. At 12pm we await to hear from MPC member Haskel who is addressing the Brighton & Hove chamber of commerce via a webinar on his role on the MPC and what the UK recovery will look like. Haskel’s comments will be scrutinised for any indication on the UK recovery.