Several health officials have voiced concerns over a second wave of coronavirus cases in the UK after Prime Minister Johnson announced easing to lockdown restrictions on Tuesday. As a result, the Pound has struggled to make any further gains against both the Euro and the Dollar and is trading in a range for the time being. The focus is also on post-Brexit trade negotiations with the EU which is keeping the market on edge. Analysts at Bank of America have suggested that the Pound is behaving more like an emerging market currency since the Brexit referendum due to the volatility that Sterling has experienced.
German Ifo business climate data came out slightly better than expected at 86.2 compared to 85.0 that was forecasted. Ifo economist Wohlrabe also commented that he believes that the German economy will experience economic growth of around 7% in Q3 2020 and suggested that economic contraction for Q2 may have been over 10%. ECB Chief economist Lane has said that the central bank’s current pandemic response is not open-ended but this depends on how quickly the Eurozone recovers with the help of existing stimulus. Overall, the Euro has strengthened against the Pound but has struggled against a stronger Dollar.
At 1:30pm today, US GDP data as well as unemployment claims figures will be released which will be closely watched by the market as is likely to cause some volatility for the greenback. The IMF have updated their forecasts and now predict that the global economy will contract by 4.9% compared to 3.0% that it mentioned in its April predictions. This led to a more risk-averse approach by the market which helped the Dollar strengthen due to its safe-haven status. The US are reported to be considering introducing new tariffs worth $3.1 billion on goods from the EU and UK which is likely to increase tensions amongst all parties.