UK summer statement, GBP/USD and EUR/GBP analysis:
- GBP/USD[1] is well placed to maintain its recent strength after a mini budget consisting of economic measures designed to offset the damage to the UK economy caused by the coronavirus pandemic and the subsequent lockdown.
- EUR/GBP[2] could well weaken further too as the markets react to a program that was broadly in line with expectations, providing a fiscal stimulus – albeit one that may not be sufficient to prevent a relatively weak recovery from the Covid-19 slump.
GBP/USD outlook: further gains possible after mini budget
The outlook for GBP[3]/USD[4] is looking more and more positive after the pair’s breach of the 1.25 level and a package of measures from UK Chancellor of the Exchequer Rishi Sunak designed to protect jobs and help the UK economy recover from the devastation caused by the coronavirus pandemic and the lockdown imposed to limit its spread.
While a swift V-shaped recovery still seems unlikely, the measures in Sunak’s summer statement – effectively a mini budget – will provide a substantial fiscal boost which, coupled with loose monetary policy, should ensure that the impact on both businesses and individuals is as limited as possible.
GBP/USD Price Chart, One-Hour Timeframe (June 30 – July 8, 2020)
Chart by IG (You can click on it for a larger image)
Sunak’s measures should also ensure that EUR[5]/GBP continues to slide lower after its tentative move below 0.90 but the impact on the FTSE 100[6] index of the major London-listed stocks will likely be limited outside the housebuilding, hospitality and leisure sectors.
EUR/GBP Price Chart, One-Hour Timeframe (June 29 – July 8, 2020)
Chart by IG (You can click on it for a
