A big test for the EUR/USD pair will be next week’s ECB meeting. We think that the bank will announce an increase in its pandemic purchase programme, which may (somewhat paradoxically) provide additional support for the common currency, in our view.

BoE’s Saunders hints at negative UK interest rates

Sterling also rallied against the broadly weaker dollar on Thursday, although its gains were contained to around half a percent.

There remain a number of forces preventing a more sustained move higher in the pound – the market pricing in the possibility of negative Bank of England interest rates, Brexit uncertainty and the UK’s growing pile of debt made worse by the government furlough scheme. MPC member Michael Saunders commented on the former yesterday, warning that further rate reductions may be in the offing. He stated that it would be better for the bank to inject too much stimulus into the UK economy than too little given the seriousness of the economic threat posed by the virus.

With no major economic data out of the UK today, the pound may be driven by events elsewhere.