GBP/USD – Pound may pick up momentum
Boris Johnson, the Prime Minister of Great Britain, is reportedly still struggling with the fallout from his near-death experience with the coronavirus. Johnson faces criticism for his handling of the crisis.
Johnson faced criticism for the lack of medical equipment for the doctors and announcing the lockdown too late. More recently, he has received criticism for several U-turns on issues related to the reopening of schools.
His only decision faced universal praise for the leave scheme, paying workers most of their wages while they cannot work. The program kept employees attached to their jobs and helped trigger a spike in consumption.
However, this scheme will expire in October. Chancellor of the Exchequer, Rishi Sunak, who already considered raising taxes to plug a hole in the government’s finances, reiterated that the program seems unsustainable. Will the Prime Minister be surprised by announcing an extension? That could boost the British pound.
Johnson faces off against Labor leader Keir Starmer, a former prosecutor who has proven effective in coercing the government. In fact, the face-to-face meeting in the House of Commons could trigger market-moving headlines.
What Parliament Has To Say
Elsewhere in Parliament, Bank of England Governor Andrew Bailey will speak to MPs and update the economy. The bank intends to leave the policy unchanged after cutting rates near zero and injecting more funds. Any hint of negative rates could weigh on the British pound while increasing the bond-buying tool that would boost the pound.
A significant correction drove GBP/USD’s slide on Tuesday in favor of the dollar. In addition to profit-taking, the dollar benefited from optimistic data from ISM manufacturing, surprising with 56 points in August, the highest level since 2018.
Today, ADP data on private employment in the United States and speeches by several Fed members are expected. Will the dollar resume its falls after receiving a reminder from the Federal Reserve? That remains an open question.
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