24 September 2020
The pound remained depressed yesterday on the back of growing market fears about a second lockdown in the UK. The PM has announced new rules to curb the rise in infections and warned that greater restrictions may be necessary if there is no improvement in the situation. This along with persistent Brexit-related uncertainties are taking its toll on sterling. The data out yesterday did not help matters either, with the Service Sector PMI falling more than expected in September.
On the other hand, the dollar continues to benefit from its status as the safe-haven currency as the second wave of Covid takes hold across the globe. Markets are down after PMI surveys highlighted the risks of a double-dip recession.
The single currency came under renewed selling pressure as the Markit Services PMI preliminary estimates showed that activity in the region fell into contraction territory. Manufacturing data was slightly better, but still mixed across the entire region.
The German IFO business climate survey headlines this morning. In the US, the release of Initial Weekly Jobless Claims and New Home Sales data are the highlights. This, along with testimony by the Fed Chair Powell and Treasury Secretary Mnuchin, will influence dollar dynamics.
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