Search ForexCrunch

GBP/USD has been rising amid hopes for US fiscal stimulus, but everything else is playing against the cable. Yohay Elam, an Analyst at FXStreet, explains four reasons to sell sterling.

Key quotes

“Stimulus asymmetry: While America’s potential relief package is still unknown, Britain’s less-generous furlough scheme is already priced into sterling. Chancellor of the Exchequer Rishi Sunak is set to lay out a reduced program to aid employees who are unable to work due to the pandemic. The move was already made known a few weeks ago, and Sunak’s official announcement is unlikely to help the pound. Moreover, paying only two-thirds of salaries is set to hurt consumption.” 

“Rising coronavirus cases: The lower temperatures are forcing people to spend more time inside and eroding support in the government may prompt people to flout social distancing rules. The result is clear – rising pressure on the National Health Service. The government is contemplating imposing new restrictions in the northwest, where the disease is spreading at a rapid clip. That implies reduced economic activity going forward.” 

“The economy was not doing that great: Gross Domestic Product figures for August badly disappointed. Output grew by only 2.1%, contrary to expectations for more than double that amount. Moreover, July’s GDP statistic was revised down to 6.4%. While these figures look robust in absolute terms, they come after a devastating drop in the spring. The chances that the Bank of England sets negative interest rates is growing.”

“Brexit: The saga continues with ups and downs – and Friday will likely be a down day. Chief EU Negotiator Michel Barnier tends to release updates on the talks at the end of the working week and he almost always downbeat. In any case, no breakthrough is likely before the EU Summit next week. London and Brussels remain at odds over state aid and fisheries.”