The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
The pound is struggling this morning, with GBP/EUR slipping to €1.0960 and GBP/USD tumbling to $1.2026. GBP/CAD and GBP/AUD have retreated to C$1.7152 and AU$2.0146 respectively, while GBP/NZD holds steady at NZ$1.9903.
The coronavirus will continue dominating market sentiment today, stoking more volatility in the currency market.
What’s been happening?
The US dollar tore higher during yesterday’s session, climbing almost 2% against the majority of its peers as investors continued to flock to safe-haven currency amid the ongoing coronavirus crisis.
Demand for the ‘greenback’ was further exacerbated by growing fears over a potential USD shortage as traders continue pouring into the US currency.
This resulted in USD exchange rates skyrocketing in spite of a surprise contraction in US retail sales last month stoking concerns for an even greater downturn in March as the coronavirus crisis reached the US.
The pound was able to stabilise on Tuesday, with Sterling sentiment buoyed by the UK government’s announcement of a coronavirus stimulus package worth £330bn, with Chancellor Rishi Sunak pledging to go even further if needed.
Meanwhile, the euro came under heavy pressure on Tuesday following the release of the latest ZEW surveys.
These showed economic sentiment in Germany and the wider Eurozone plummeted to an eight-year low this month as fears over the economic impact of the coronavirus resulted in a significant deterioration in the outlook of economists.
What’s coming up?Coronavirus developments will continue acting as the main catalyst of movement in currency markets today so we expect to see even more volatility.
In terms of the US dollar this is likely to see the safe-haven currency maintain its upward trajectory, although potentially at a slower pace after the Federal Reserve announced measures to improve liquidity.
For EUR investors, as most of Europe remains in lockdown the focus will be on what governments are planning in terms of stimulus and whether analysts believe it will be enough to support the already fragile Eurozone economy.
In the UK, markets will be mostly focused on the government’s daily coronavirus briefing and whether any new measures will be introduced.
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)