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Currency markets in chaos as oil rout rocks markets

currency-newsCurrency markets in chaos as oil rout rocks markets
In an extremely volatile start to the week, currency markets were upended on Monday as they were rocked by coronavirus fears and a rout in oil prices.

So far this morning things are looking a little quieter, with GBP/EUR flat at €1.1465 and GBP/USD holding at $1.3069. GBP/CAD is steady at C$1.7840, while GBP/AUD and GBP/NZD have climbed to $1.9904 and NZ$2.0711 respectively.

Looking ahead, analysts are bracing for more chaos this morning as the coronavirus continues to dominate headlines.

What’s been happening?       

The US dollar was caught up in another sell-off at the start of this week’s session, with the currency plummeting in line with a sharp fall in US bond yields.

The slump in US yields comes as markets price in expectations for a deep rate cut from the Federal Reserve next week. Analysts are currently predicting the bank could slash interest rates to near zero in an effort to limit the economic impact of the coronavirus.

This plunge in the US dollar proved particularly beneficial to the euro, propelling the EUR/USD exchange rate to a new 1-year high.

This uptick in the single currency comes in spite of rising fears that Italy is hurtling towards a recession as the quarantining of the entire country further disrupts the nation’s economy.

Meanwhile, trade in the pound was mixed at the start of the week, with the UK’s relatively limited outbreak of the coronavirus allowing for a modest uptick in Sterling.

What’s coming up?

Looking ahead, it’s all but certain that coronavirus developments will continue to act as the main catalyst of movement in currency markets today.

The US dollar may continue trending lower if US yields plummet further and USD investors grow increasingly concerned about the spread of the disease throughout the country.

For EUR investors the publication of the Eurozone’s latest GDP figures may highlight just how vulnerable the bloc is to a recession as they are set to confirm growth in the bloc slowed to just 0.1% at the end of 2019.

Finally, a focus on the UK’s upcoming budget could limit movement in the pound today.
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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