WEEKLY MARKET REPORT 13/08-2020

The latest UK GDP data showed that the economy entered into a technical recession as activity slumped across the board. The preliminary Q2 q/q reading fell by a record 20.4%, the largest fall since quarterly records began in 1955.

Today’s ONS data shows that the UK economy is now 22.1% smaller than it was at the end of 2019, highlighting the effect the COVID-19 pandemic has had on economic activity.

The Pound fell sharply against the Euro over the course of the past 24 hours and looks set to endure further weakness unless the UK economy can start printing some impressive data and close its performance gap with the Eurozone.

While Sterling retains a broadly supported tone against the Dollar, and indeed the past month sees Sterling looking relatively robust against other major and minor currencies, against the Euro the broader trend still ultimately remains one of decline.

Importantly, the Euro is not just holding an advantage against the Pound as it does so against the U.S. Dollar too, largely thanks to global investors swiveling towards the Eurozone which they believe should outperform the UK and U.S. in the post-covid economic recovery stakes.

The key point here is expectations for economic out performance matters for FX right now, and the Eurozone is on top.