Despite some European countries relaxing lockdown measures, yesterday UK Chancellor Michael Gove ruled out this possibility in the UK anytime soon. The official lockdown, which begun on the 23rd of March was extended by 3-weeks last Thursday. Gove yesterday also ruled out the chances of schools being re-opened by the 11th of May which was suggested by a Sunday Times report.
Over 15,000 people have now sadly lost their lives as a result of the virus and there will be no amendments to the lockdown measures until the numbers drop off. UK Prime Minister, Boris Johnson who has now recovered from the virus himself is now coming under pressure for not implementing the rules sooner and ignoring scientists’ warnings, according to the Sunday Times. The fall-out from the Corvid-19 virus is bound to continue to impact GBP exchange rates and so far we’ve seen the currency trade over 10-cents high to low against both the US dollar and the euro in the space of 6-weeks.
The pound has recovered from the sharp losses seen in March as stock market selloffs have eased, and China has turned a corner with Wuhan reopening for business. This was seen a major positive for all moving forward as it’s regarding as where the pandemic begun. Moving forward I think any major 2nd waves of the virus could result in similar price movements to what we saw in March, and those of our clients with a GBP currency requirement should remain cautious. Due to the high current deficit the UK operates in, any market meltdowns appear to focus quite heavily on the pound, which is why I think sterling sellers should remain cautious.
Some of the latest updates out of the UK include the Government’s announcement to extend its furlough scheme until at least the end of June. This is due to the extension of the lockdown last Thursday. Also, the Institute for Social and Economic Research (ISER) has claimed that up to 7 million jobs remain at risk if the lockdown lasts for months.
Tomorrow, the UK’s average earnings and Unemployment figures for February will be released which could impact GBP exchange rates as they will cover this area of the economy in the early stages of the virus.
Last week the International Monetary Fund (IMF) warned that the world potentially faces its worst recession since the great depression of the 1930’s. It announced this update at its new World Economic Outlook and cut the global GDP prediction to -3% which is a major amendment to its +3.3% growth forecast back in January.
On a more positive note though there has been some optimism returning to the markets on hopes of a Covid-19 cure that would allow business to reopen in many parts of the world. On Friday there were media reports that Gilead Science Remdesivir drug was performing well on a group of seriously ill Covid-19 patients at the University of Chicago Medicine. The USD dropped off due to this news as the currency has benefited from its safe haven status recently so any returns to risk appetite will likely result in a weaker US dollar.
Yesterday, the head of the Eurozone bailout fund, Klaus Regling said that Europe will need at least another 500 billion euros from EU institutions to finance its recovery from the pandemic.
German manufacturing figures for April will be released on Thursday which could be a market mover for EUR exchange rates. Before then there will be a ZEW economic sentiment release (Tuesday) which could also impact exchange rates.
US jobless claims will also be released on Thursday and this area of the US economy is currently under the spotlight with millions of job losses taking place so far in the US, so this release is worth looking out for.
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