Bank of England Governor Bailey has written that although negative interest rates are a policy that is being looked at, the central bank will not make any decisions quickly and instead will wait for further economic data. This helped the Pound find some support after losing ground against the Euro and Dollar over the last few days.
With UK-EU trade talks due to restart next week, EU Chief Negotiator Barnier has suggested that the EU are ‘open’ to allowing an extension to the Brexit transition period. Economists believe that the UK economy will face an annual deficit of 5% by 2024, which will put a strain on public spending until the next election.
ECB member Villeroy has commented that negative interest rates may be an effective tool for the ECB to use in order to combat the economic effects of the coronavirus. French finance minister Le Maire has suggested that the French economy will contract by over 8% this year. German retail sales came out better than expected this morning which has given the Euro some support. Eurozone consumer price inflation is due at 10am this morning which is likely to cause some volatility for the common currency.
Yesterday, US preliminary GDP came out worse than expected at -5.0% compared to -4.8% that was forecasted. This led to the Dollar weakening against the Euro and the Pound. In addition, disappointing unemployment claims data further led to further losses for the greenback. With consumer sentiment and inflation expectations due this afternoon followed by a speech by Federal Reserve Chairman Powell, the Dollar is likely to experience continued volatility.