The pound weakened against both the euro and the dollar yesterday. It’s fall against the greenback was due to increased COVID-19 fears, which caused investors to turn to safe-haven currencies. Ongoing worries about trade negotiations with the EU have also continued to impact sterling, and the EU is set to reveal their negotiating mandate later today. The pound is slightly stronger against the euro this morning, however, as German GDP data missed expectations.
Ahead of the UK Budget, which is due to be announced in two weeks, there have been reports that the Chancellor may relax fiscal rules in order to boost government expenditure. This would, in theory, be positive for the UK economy and potentially be supportive for the pound.
EU-UK trade negotiations will formally start next week. This week, the Prime Minister has been warned that the French government won’t be ‘blackmailed’ into a trade deal that risks its long-term economic interests. We will, no doubt, hear more of this rhetoric throughout the week, which could affect the pound.
