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- Euro slumps as ECB fails to reassure markets
- Covid-19 fears keep pound under pressure
- US dollar shakes off weak inflation signals
ECB action fails to boost euro
The European Central Bank (ECB) failed to shore up the euro yesterday in spite of its decision to avoid cutting interest rates deeper into negative territory.
Comments from ECB President Christine Lagarde spooked markets as she emphasised the need for fiscal stimulus, appearing to undermine the central bank’s commitment to supporting the Eurozone economy.
As the impact of Lagarde’s words start to fade the euro may recover some of its lost ground in the short term.
However, growing anxiety over the risk of a wider Eurozone economic slowdown as a result of Covid-19 looks set to keep EUR exchange rates generally biased to the downside.
Covid-19 worries weigh on pound
As anxiety over the spread of Covid-19 fuelled another day of selling across financial markets the pound registered further losses.
Increasing worries over the ultimate economic impact of the pandemic drove dovish market sentiment, even as the UK government prepared to step up its response.
Although the shock US travel ban on European nations did not target the UK this failed to encourage any particular confidence in the economy.
The risk-off environment is set to continue into the weekend.
US dollar benefits from high safe-haven demand
With markets in a highly risk-averse mood the US dollar found renewed strength against its rivals in spite of underwhelming domestic data.
While February’s producer price index figures fell short of forecast, pointing towards a weaker level of inflationary pressure within the US economy, this was not enough to dent USD exchange rates.
As long as investors continue to pile out of risk-sensitive assets the US dollar will remain on a generally stronger footing.
Even if this afternoon’s University of Michigan consumer confidence index weakens as expected, USD exchange rates may continue on their current bullish run.
Friday, 13th March 2020
14:00 USD University of Michigan Consumer Confidence Index
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)