A continued stream of government statements had been released recently including that of Health Secretary Matt Hancock who discussed the initiation of human trials for the COVID-19 vaccine starting later today which had been created by the University of Oxford.
It comes at a time with a plethora of record-breaking statistics. Some of which include the highest mortality figures recorded in 20 years up to the 10th April, which is twice the deaths anticipated for this period considering that the number of new cases is beginning to taper off. Others records come in the daily death rate which was recorded at 823 yesterday according to the BBC bring total fatalities to 17,337.
How this is being considered to applied to the currency market still seems to be undecided. Looking at very common currency pairings including GBPEUR and GBPUSD rates, both currently residing at 1.138 and 1.231 respectively at the close of trade yesterday, have seen reduced volatility than what was witnessed in March and the beginning of this month.
With the possibility of the Coronavirus wiping off up to $9tn dollars from the global economy according to the IMF, the rates are predominantly virus-driven. However, unsurprisingly, all three nations are still being relatively equally ravaged by economic contraction and societal damage at present and likely to continue through 2020. As a result, it is very difficult to distinguish whether the UK, Unites States or the Eurozone has been faring better which could be the reason for the smaller rate movements over the last few days.
Sterling is unlikely to receive any support, or any potential losses, through economic data moving forward as next week does not provide any significant data releases to note. Two reports published earlier this week came in the form of the Unemployment rate and Consumer Price Index which came in at 1.5% which is 0.2% lower than in February. UK Unemployment is also looking to skyrocket with Yael Selfin chief economist from KPMG predicting that 13mn jobs are at high-risk which represents 36% of the labour workforce.
The Eurozone is an interesting position at the moment with the virus. It’s 27 member states had always had a variety of economic and social dispositions before the pandemic caused the global lockdown. However, these economic differences are beginning to further divide these nations as the virus has affected some EU countries like Italy and Spain, with roughly 200k cases and over 20k deaths, far worse than the likes of the Netherlands with a far fewer 30,000 cases and 4000 deaths. Of course, total population and population density play into this but it has caused growing tension concerning where the European Central Bank (ECB) should implement the €750bn emergency package. This also ties in with the proposed Coronabonds which is where nations take up shared debt to help each other out but EU economic powerhouse Germany has rejected these plans on account of it not being in the countries best interest and against funding policy.
It is a likely to be a busy week ahead for the Euro next week though as a host of significant market data is out including the ECB Lending Survey on Tuesday, Harmonized Consumer Price Index on Wednesday, with Unemployment Rate and GPD Q1, Consumer Price Index and the ECB Interest rate decision to finish off on Thursday.
This could be the week the Euro needs to break away from the rate stagnation as fresh data giving insight into fiscal policy and the state of current economic affairs could provide a needed shift in the rates.
The USD should also have an interesting week ahead with a few important data releases. The initial jobless claims is published later today and is expected to come with an eye-watering 15% unemployment and the potential for the current 20mn unemployment figures to reach circa 26mn in a couple of weeks’ time. This ties closely in with UK unemployment as mentioned in the previous section with unemployment set to double within the calendar year from the Financial Times.
The final release for the week will come on Friday with the United States publishing the non-defence Capital Goods Orders. This is an especially sensitive data release as it fluctuates in consistency with the current economic state. This durable goods consumption for long-term use and involved in high volume transactions so could be telling of the effects of the outbreak on the US so far if the results lands further away from market predictions.
US President Donald Trump is attempting to counteract some of the shortfall that COVID-19 will bring to the economy through with his attempts to reduce lockdown measures early next month. Considering that the US is the worst affected country for both cases and deaths globally, at 800k and nearly 50k respectively, this has been met with heavy criticism in his thinking that the risk of further contraction is more important than an increased risk of a second wave of the pandemic hitting the nation.
Brian Coulton, the Chief Economist at Fitch Ratings, has stated that with “global GDP set for fall by 3.9% this year, a recession of unprecedented depth in the post-war period” will certainly deteriorate the quality of life for many people so any attempts to keep the world’s largest superpower afloat could reap rewards further down the line.
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