Pound Strengthens On U.K. Fiscal Stimulus Plan
The pound appreciated against its major rivals in the European session on Thursday, as U.K. government announced ?30 billion stimulus package to shore up the economy hit hard by the pandemic.
On Wednesday, the Chancellor of the Exchequer announced tax cuts and extra spending measures to revive the labour market and increase consumer spending.
The VAT will be cut to 5 percent from 20 percent for six months to help hospitality and tourism sectors.
Under a bonus plan, Sunak announced a ?1,000 bonus for companies that retain previously furloughed workers until 2021. The cost of the bonuses could be ?9 billion if every furloughed worker returned to work.
Sunak unveiled a stamp duty cut in England and Wales for this financial year. The homebuyers will be exempted to pay stamp duty, if purchases are less than ?500,000 until March 31.
European stocks were higher as Chinese markets extended their winning streak to the eight day on hopes of a faster recovery for the world’s second largest economy.
Official data showed that the country’s month-on-month consumer inflation rose for the first time in four months in June. Producer prices fell for the fifth consecutive month but at a slower-than-expected rate.
The UK housing market showed signs of a recovery as buyer demand, sales and fresh listing improved noticeably following the lockdown related falls, according to the residential market survey results published by the Royal Institution of Chartered Surveyors.
A net balance of 61 percent of survey respondents reported a rise in buyer enquiries in June, which was a strong rebound from -94 percent registered in May, data showed Thursday.
The pound climbed to 1.1882 against the franc, its highest level since June 18. If the pound rises further, 1.22 is possibly seen as its next resistance level.
The pound spiked up to more than a 3-week high of 1.2668 against the dollar, after falling to 1.2598 at 5:00 pm ET. Next key resistance for the pound is seen around the 1.29 area.
The pound hit more than a 3-week high of 135.92 against the yen, up from Wednesday’s closing value of 135.24. The pound is seen facing resistance around the 137.00 level.
The pound firmed to a fresh 3-week high of 0.8946 against the euro, compared to yesterday’s closing value of 0.8984. The currency is likely to locate resistance around the 0.88 level.
Data from Destatis showed that Germany’s exports grew for the first time since the coronavirus pandemic hit the economy in March.
Exports grew 9 percent month-on-month in May, reversing a 24 percent decline in April. Nonetheless, shipments were expected to grow at a much faster pace of 13.8 percent.
Looking ahead, Canada housing starts for June are scheduled for release at 8:15 am ET.
U.S. weekly jobless claims for the week ended July 4 and wholesale inventories for May will be out in the New York session.