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GBP weakens, will coronavirus cut UK GDP by 15%?

currency-newsGBP weakens, will coronavirus cut UK GDP by 15%?

The pound struggled to find support on Monday as economists made some startling forecasts for UK economic growth in the second quarter.

Sterling remains on the back foot this morning, with GBP/EUR dipping to €1.1187 and GBP/USD tumbling to $1.2292. GBP/CAD has retreated to C$1.7460, while GBP/AUD and GBP/NZD have slipped to AU$1.9943 and NZ$2.0518 respectively.

Germany’s latest jobs report will be in the spotlight today. Will the coronavirus have prompted a rise in unemployment in March? 

What’s been happening?

The pound lacked direction at the start of this week’s session, with the currency’s recent rally running out of steam in the wake of some dire economic forecasts for the UK.

Analysts at the Centre for Economics and Business Research (CEBR) suggest the UK economy could shrink by as much as 15% in the second quarter of 2020 due to the coronavirus lockdown.

In Europe data published over the weekend regarding Italy’s and Spain's coronavirus outbreaks undermined the euro during yesterday’s session after both country’s report a rise in new cases after showing signs of falling for several days.

Further weighing on the euro was the publication of the Eurozone’s economic sentiment index as it posted its sharpest decline on record this month. 

 

Meanwhile, renewed concerns over the global economic impact of the coronavirus helped the safe-haven US dollar stage a comeback on Monday.

However, these gains were trimmed somewhat by the Dallas manufacturing index as it plummeted to an all-time low of -70 in March, well below expectations for a modest fall to –6.2.

What’s coming up?

In focus this morning will be Germany’s latest employment report. The data will provide EUR investors with their first insight into how the jobs market in the Eurozone’s largest economy is faring.

Expect to see the euro face some headwinds if the coronavirus crisis has resulted in a sharp rise in unemployment.

In the UK, investors will be focused on the government’s response to coronavirus amid speculation more restrictive measures could be imposed as the number of infections rises.

It will be a similar story in the US, which is struggling to contain the world's largest outbreak. 

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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