Yesterday afternoon, the Pound strengthened against both the Euro and the Dollar. Chancellor Sunak is set to announce further measures to stimulate the economy at midday following Prime Minister’s Questions that will include a £2 billion ‘kickstart scheme’ that will help people aged 16-24 find jobs by subsidising six-month work placements and a temporary stamp duty holiday to help the property market. Prime Minister Johnson has reaffirmed to German Chancellor Merkel that the UK want to intensify trade negotiations with the EU to agree to a deal but suggested that the UK are ready to leave the EU without one if need be.
Italian retail sales came out much better than expected at 24.3% compared to 15.0% that was forecasted although the market chose to focus on the disappointing German industrial production figures instead which put the Euro under some renewed pressure. The European Commission also released their updated forecasts and have revised them downwards for 2020 and 2021, foreseeing that the Eurozone economy will now contract by 8.3% and only grow by 5.8% next year. ECB President Lagarde believes that it will take longer than expected for EU member states to come to a compromise over the proposed EU recovery fund.
Initially, the Dollar strengthened early on yesterday due to its safe-haven status with the market remaining concerned about the ever-increasing number of coronavirus cases globally which could potentially trigger further lockdown measures. FOMC member Mester has indicated that the economic activity in the US will take some time to go back to pre-coronavirus levels. In addition, fellow member Clarida opened the door to further economic stimulus if it is needed.