ECB easing pandemic support, £ jumps higher

Hi everyone,

 

The Pound started the week firmly on the back-foot and the early performance was certainly looking bleak for the rest of the week. Enter the ECB midday Thursday and things suddenly took a turn for the better. The ECB announcement to reduce its quantitative easing was expected, but the weakness of the € shortly after was not. Analysts believe the fall was down to a "sell the fact" reaction, meaning the recent € value had already priced in the incoming news for some time.

 

£-€ rates gained a total of 0.4% in the afternoon, nearly the same amount it lost earlier in the weeks trading. £-$ rates also recovered some ground yesterday after risk sentiment turned more positive in the markets. Overall, it has been a surprisingly strong week for Sterling after the overwhelming majority of economists expected a poor one. It's clear any further upside still remains limited across the board, but the £ continues to be resilient and favourable. 

 

We have been mentioning for weeks now that economic growth in the UK has massively slowed of late, which has also hampered the Pound. GDP data for July showed growth at just 0.1%, significantly below expectations due to the so-called 'pingdemic'. It confirms an economic summer lull in the UK and with the Government's decision to raise NI contributions, economists believe the recovery has been set back a further 12-months. 

 
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