The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
After plummeting yesterday the pound is showing signs of recovery this morning, with GBP/EUR buoyed at €1.1264, GBP/USD stable at $1.2596 and GBP/AUD and GBP/NZD holding steady at AU$2.0064 and NZ$2.0617 respectively. Meanwhile, a rally in oil prices has weakened GBP/CAD, with the pairing sliding to C$1.7458.
Expect to see a similar trend emerge today as coronavirus headlines continue to drive markets.
What’s been happening?
The US dollar skyrocketed during yesterday’s trading session, with investors flocking to the safe-haven currency as markets were gripped by coronavirus panic.
This came amid another crash in stock prices on Thursday, as Donald Trump’s failure to calm markets and the implementation of a European travel ban stoked fears of a global recession.
The US dollar’s gains against the pound were particularly pronounced, with USD/GBP soaring nearly 2% to reach a new five-month high.
Exacerbating Sterling’s losses yesterday were concerns over the UK stepping up its response to the coronavirus amid fears it could hurt economic growth.
Ultimately the government didn’t go so far as to shut schools or restrict public gatherings, but by this time the damage was already done.
Meanwhile, trade in the euro was mixed as the European Central Bank (ECB) became the latest central bank to announce stimulus measures in an attempt to limit the economic impact of the coronavirus.
This saw the ECB announce an expansion of its quantitative easing programme as ECB President Christine Lagarde warned of a ‘considerable worsening of the economic outlook’ in the Eurozone.
What’s coming up?
In what is becoming a running theme, we can expect coronavirus developments to dominate market sentiment today.
The US dollar could maintain its upward trajectory as skittish investors continue to flock to the currency.
For EUR investors the focus will be on European leaders as they hope that governments will begin to outline their plans for fiscal stimulus.
Finally, GBP investors will be keeping a close eye on developments in the UK today, as a sharp increase in cases could see the government rapidly escalate its coronavirus countermeasures.
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)