It was a hard old slog for sterling this week, eventually a seventh of a cent better off against the euro and a quarter of a cent higher against the US dollar. As the UK prepares for its own Independence Day, when pubs, restaurants, hotels and hairdressers can finally start reopening, the week also saw two important speeches. One should have helped the pound, but it didn’t, and the other ought not to have done, but it did. Off the back of those speeches on Tuesday, the pound was within an inch of being the day’s top performer, beaten only by the Canadian dollar.
The first speech was by Bank of England Chief Economist Andy Haldane, saying the country was on course for a V-shaped recovery. Coming sooner and faster than expected, it brings with is the risk of higher inflation. This optimism still came with a note of caution though, expressing that increasing unemployment as the government unwinds its furlough scheme could scupper the speedy economic recovery. Haldane’s speech was the sort of talk that would traditionally encourage buyers of currency, but they were conspicuously absent after his statement. Prime Minister Boris Johnson then took to the podium for his ‘Economy Speech’, and announcing £5 billion of capital infrastructure spending. Much of this plan is a rehash of last year’s election manifesto, but it inspired buyers of the pound, with sterling strengthening against the US dollar and the euro by an average of 0.3%.
It appeared sentiment was the main driver for sterling, as demonstrated above. Other points to note include the money supply figures from the Bank of England, revealing a third month of net debt repayments by households and a slump in mortgage approvals. Brexit negotiations continued to rumble on, with the focus on a landing zone that could form the basis of an agreement on trade.
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