The pound has largely continued its run of good gains over the last week hitting a high of 1.1381 against the Euro yesterday and 1.2438 against the US dollar. Another standout rate yesterday was 2.1038 for GBP NZD.
UK Purchasing Managers Index (PMI) data for the manufacturing sector took a dive yesterday creating volatility for the pound. The data fell to a three month low of 47.8 in March down from 51.7 in February citing supply chain disruption and weak demand. On a brighter note, market research firm NPD Group reports that sales of boardgames and puzzles have soared 240% during the lockdown with Monopoly and Lego some of the best performers.
The pound fell 0.5% against the dollar after the release but made gains against the Euro. Data for the weightier services sector will be released tomorrow and is one to watch out for.
UK Purchasing Managers Index (PMI) data for the manufacturing sector took a dive yesterday creating volatility for the pound. The data fell to a three month low of 47.8 in March down from 51.7 in February citing supply chain disruption and weak demand. On a brighter note, market research firm NPD Group reports that sales of boardgames and puzzles have soared 240% during the lockdown with Monopoly and Lego some of the best performers. The pound fell 0.5% against the dollar after the release but made gains against the Euro. Data for the weightier services sector will be released tomorrow and is one to watch out for.
Chinese PMI data for the manufacturing and non-manufacturing sectors both jumped much higher this week moving into expansion. To put it into perspective the manufacturing sector was sitting at a level of 35.7 in February when the world was watching those temporary hospitals being built in China. That figure has now risen to 52.0 in March marking a rapid rebound. This is striking as it shows there can be light at the end of the tunnel if the British government is able to manage the Covid-19 pandemic and control the virus. With reports that 20 flights per day are landing in the UK from Covid-19 hot spots including the US, the future remains uncertain.
Despite government attempts to protect employees and the self employed the Sunday Times reported that unemployment is set to more than double in the months ahead and that the rise in the second quarter will be sharper than during the financial crisis of 2008. Investment bank Nomura predicts unemployment reaching 8% in the next three months as GDP falls sharply. The bank goes further stating there will be an economic hit “multiple times that of the global financial crisis.”
Although unemployment rose to over 8% during the financial crisis, it started from a higher starting point of 5% rather than the current 3.9% recorded in January.
The pound continues to swing wildly against all of the major currencies as the markets try to second guess how long the corona virus lockdown will last in the UK and crucially the impact it has on the British economy.
The EU has it’s own Covid-19 issues with both Spain and Italy seeing the highest number of deaths in the pandemic so far. Italy has extended its lockdown until 13th April and there is hope they may now have seen the peak. Italy has reported the most deaths at 12,428 to date. The Financial Times reports that The European Commission is making plans to provide up to €100 billion for countries that need to pay jobless claims which are currently rocketing in the EU.
Any developments could see market volatility if the EU is able to structure loans to finance governments in this uncertain period. This and other measures are being discussed at a meeting next Tuesday and could be important for the Euro and how the EU continues to respond to the pandemic. EU unemployment data released yesterday improved to 7.3% from the month prior but this relates to February numbers. The March numbers to be released will likely paint a different picture.
The World Health Organisation has suggested that the US is now likely to be the epicentre of the coronavirus pandemic and any new developments could impact on dollar exchange rates.
Those with dollar requirements would be wise to keep an eye on this afternoons’ US jobless claims as high volatility was seen this time last week.
Tomorrow sees the hugely important US non-farm payroll numbers. Considering that jobless benefit claims increased from 282,000 to a record 3.3 million last week there will be much interest in both sets of data which may result in high volatility for the US dollar against the pound. Forecast for non-farm payrolls is -100,000.
Oxford Economics is forecasting job losses in the US between 15 million and 20 million in the coming weeks and an unemployment rate above 10% in April.
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