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Euro jumps as confidence returns, pound driven lower by BoE caution

Philip McHugh April 22nd 2020 - 2 minute read

  • BoE forecast sends pound lower
  • Euro jumps thanks to unexpectedly positive German data
  • Sliding oil prices bolster US dollar

 
 
Pound tumbles as BoE warns of a difficult year for the UK economy
 
The pound tumbled during yesterday's trading session after BoE chief economist Andy Haldane warned the UK economy faces a modest contraction in the first quarter and an even sharper fallout in Q2.
 
Haldane also suggested any rebound later in the year is likely to be slow, with consumers potentially ‘reluctant to spend too vigorously or go out and socialise immediately after coronavirus restrictions are relaxed.’
 
At the same time, the Office for National Statistics (ONS) published the UK’s latest job’s report. Although unemployment claims rose at a far more modest pace than expected this failed to provide much support to Sterling.
 
Today’s UK inflation report confirmed that consumer price pressures eased in March. The report did little to support the pound.
 
Euro benefits from ZEW economic sentiment
 
The mood towards the euro improved after a surprise return to positivity from the German ZEW economic sentiment index, which rebounded from -49.5 to 28.2 on the month.
 
With sentiment in the Eurozone’s powerhouse economy recovering investors were encouraged to pile back into the single currency.
 
While the Eurozone is due to publish its consumer confidence index this afternoon, EUR investors will be looking to Thursday’s summit of EU leaders.
Will the meeting help to dispel or underline concerns about EU unity?
 
Oil price slump boosts safe-haven US dollar
 
Oil prices slumped further on Tuesday, undermining risk appetite and helping the US dollar push higher across the board.
 
A sharp monthly decline in US existing home sales had little impact on USD.
 
As long as the oil market remains in a state of turmoil the US dollar looks set to trend higher on the back of safe-haven demand.
 
 
Upcoming Data:
 
Wednesday, 22nd April 2020
15:00 EUR Eurozone Consumer Confidence Index
 

Written by
Philip McHugh

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