With the coronavirus cases still rising and no immediate end in sight, world nations are doing what they can to avoid a drastic downturn in their economies. Yesterday, the Australian Prime Minister was the latest to pledge economic support for the country. The PM Scott Morrison, pledged AUD$130bn to “livelihoods of what we anticipate of being almost six million Australians". With the effects of the virus being felt around the world, both the currency and stock markets have felt the repercussions, with drastic drops having taken place in both as investors look to move their funds elsewhere
Amongst this doom and gloom however there was some good news yesterday with both the Spanish and Italian authorities suggesting there has been a slowdown in new cases. It is possible both countries, both of which have seen the highest number of deaths, have seen their peak and there might be light at the end of the tunnel yet.
The pound traded at multi day highs yesterday despite seeing their UK's credit rating being cut by ratings agency Fitch, due to the increased fiscal spending by the government to protect the economy during the ongoing crisis. This does not however suggest that this will continue, with the uncertainty still ahead of us and still no post Brexit relationship agreed with the EU, we could see the pound continue to be quite volatile for the months ahead. Fitch estimates the UK economic output would drop 4% in 2020, largely due to the downturn caused by the coronavirus.
Tomorrow sees the start of a new month and the data releases are expected to show the the beginnings of the economic downturn. Up first we have the Final Manufacturing PMI at 9.30 tomorrow, investors will be keeping a keen eye as anything under 50 will be seen as a negative for the economy.
The euro had a poor day across the board yesterday, with the single bloc having been hit the hardest with the current devastation. Italy and Spain having seen the most damage but France and Germany are now in the top 6 of countries with the most cases, putting 4 countries in the top 6 from the Eurozone. The funds required to help these economies and the bailouts already having been put in place has caused a significant strain on the Eurozone already, with no clear timescale on how long this will last further funds may yet be required to support these countries.
The Eurozone has been unable to agree a joint fiscal approach which has not been taken well by the markets, the leaders failed to launch bonds on a Pan-European level, suggested by Christian Gattiker of Juluis Baer investment bank.
With so much uncertainty ahead of us the seesaw of the currency markets is set to continue, it will be interesting to see who come out of this the quickest, whoever that is, will surely see a advantage in the markets.
The USD made gains yesterday both against the pound and the single currency, recovering its losses from Friday’s trading session. Surprisingly, yesterdays Pending Home Sales were significantly higher than predicted, the lower interest encouraging people to buy more homes, this data however does take into account the offers made in February and so not taking account the damaging effects the States would be feeling due to the ongoing pandemic. The US has now seen the highest number of cases in the world, nearing 145,000 at the time of writing, with NY seeing over 55,000 of them.
Trump has come under heavy criticism about his approach to tackling the current situation, with accusations of Trump more worried about his approval ratings rather than finding a workable solution to the problem. Social distancing has now been placed til April 30th, with a few figures from across the pond suggesting these could be lifted come the start of May and let the country return to some normality.
With the new month starting tomorrow, there will be a raft of new data coming from the US, yesterdays gains could be short lived should data not support the dollar, please do keep in touch with your account manager for all the latest news.
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