GBP: The ongoing lack of good news
As expected, UK March retail sales showed a sharp drop today, underscoring the damage from the Covid-19 crisis. Still, in terms of the impact on GBP, the UK data should play second fiddle to (a) uncertainty about UK-EU trade negotiations; and (b) speculation about negative Bank of England interest rates. On the latter, the market is now pricing for interest rates to fall below zero by November this year. With the prospects of negative rates fully on the market’s radar and in part priced in by the end of this year and for 2021, the next main hurdle for GBP should be the negative newsflow on trade negotiations and likely end to the UK-EU transition period this year. This should send EUR/GBP to 0.91 in June.