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GBP/USD has dropped off the new 2020 highs, in the vicinity of the key 1.3500 psychological mark, after encouraging US data and now trades around mid-1.3300s. Bank of England (BoE) Governor Bailey’s speech and the fate of the furlough scheme are eyed on Wednesday, Yohay Elam, an analyst at FXStreet, informs. 

Key quotes

“The one decision that Boris’ government was universally praised for is the furlough scheme – paying workers most of their salaries while they were unable to work. However, this scheme is set to expire in October. Chancellor of the Exchequer Rishi Sunak – already considering tax hikes to plug a hole in the government’s finances – reiterated that the program is unsustainable. Will the PM surprise by announcing an extension? That could boost sterling.” 

“Johnson is facing Labour leader Keir Starmer, a former prosecutor who has proved effective in pinning down the government. The face-to-face encounter in the House of Commons could trigger market-moving headlines.” 

“BoE Governor Andrew Bailey is set to speak with MPs and provide updates on the economy. The bank intends to leave policy unchanged for the time being, after slashing rates to near zero and injecting more funds. Any hint of negative rates could weigh on sterling while increasing the bond-buying tool would boost the pound.”

“The PMI’s employment component contracted, reflecting weak hiring ahead of Friday’s jobs report. Another clue toward the Non-Farm Payrolls is due out on Wednesday’s – ADP’s estimate for private-sector employment. America’s largest payroll provider’s figures significantly diverged from the government’s officials figures, yet it remains a market-moving event.” 

“The Federal Reserve has been the main downside driver of the dollar with its announcement of a policy shift last week. The Fed will allow inflation to overheat, thus keeping rates lower for longer. John Williams, President of the New York branch of the Fed, and Lauretta Mester, his colleague from Cleveland, are scheduled to speak on Wednesday. Other officials reiterated Chairman Jerome Powell’s message and kept the pressure on the dollar.”

 

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