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Coronavirus uncertainty fuels volatility in currency markets

currency-newsCoronavirus uncertainty fuels volatility in currency markets

Currency markets were in flux again on Wednesday as the global coronavirus pandemic stoked volatility. 

The pound is showing signs of stabilising this morning however, with GBP/EUR buoyed at €1.0893 and GBP/USD ticking up to $1.1864. GBP/CAD has rallied to C$1.6954, while GBP/AUD and GBP/NZD hold steady at AU$2.0016 and NZ$2.0360 respectively.

Coming up today we have both the Bank of England’s (BoE) latest rate decision and US initial jobless claims likely to influence currency markets.

What’s been happening?

After showing signs of recovery in recent days, the pound’s rally appeared to run out of steam on Wednesday afternoon.

This pull back in Sterling appeared to coincide with a pick-up in the US dollar, as the chaos of the coronavirus crisis sees the pound increasingly trade like an emerging-market currency.

In contrast with Sterling, the US dollar opened the session on the defensive, as the demand for the safe-haven currency was initially muted in light of improved market sentiment following the passing of a US stimulus bill worth nearly $2 trillion.

Demand for the ‘greenback’ was then stoked in the latter half of the European session on the back of stronger-than-expected US durable goods figures as well as a rise in US treasury yields.

Meanwhile, the euro put on a mixed performance yesterday, with EUR sentiment knocked by weaker-than-expected business confidence from Germany but simultaneously supported by the continued fall in new cases of the coronavirus in Italy. 

What’s coming up?

There are two events which are most likely to influence currency markets today, the Bank of England’s (BoE) latest rate decision and US initial jobless claims.

First up on the docket will be the BoE’s policy decision, where the bank is widely expected to leave interest rates unchanged after announcing two emergency rate cuts earlier in the month.

However, the fact that the BoE is still going ahead with its scheduled policy meeting this week is telling. The bank may be planning further action in the form of expanding its quantitative easing programme.

Across the pond all eyes will be on the traditionally non-influential weekly US jobless claims.

This is because USD investors are bracing for a deluge of new claims for the week ending 21st March, with analysts predicting a jump into millions due to mass layoffs from the coronavirus crisis.

Philip McHugh

Philip McHugh

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)

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