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30 year lows

30 year lows

GBP

Sterling suffered yet another bruising with a poor European trading session followed by capitulation just after the market closed. Confidence in the UK outlook remained extremely fragile amid fears over a deep recession while a sharp global downturn was also a key element undermining the UK currency, especially with oil prices continuing to slide. Tuesday’s announcement of the UK government’s £330 billion stimulus package failed to provide any shelter for the Pound, the Dollar gained 2.2% on the day and the Euro a mere 1%. 

Bank of England Governor Bailey stated that the bank was watching Sterling developments closely and that the moves would be taken account of at next week’s policy meeting, before hinting that negative rates were not the answer. After the daily Cobra briefing it was announced that the UK is closing schools and London braces for a lockdown. The handbrakes were released and Sterling relinquished another 2.5% to the Dollar, nearly 700 pips lost in 24 hours and dragged the pair to 1.1478,  its lowest level since 1985. The Euro gained another 3% on the Pound as nearby investors continued to liquidate positions. 

Do expect further high volatility today. 

 

USD

The USD accelerated the upside yesterday, as the market continued to evaluate the recent stimulus measures announced by the Federal Reserve. In fact, the USD index quickly surpassed the 100.00 and 101.00 marks to clinch fresh tops last seen in March 2017.

The dollar, in the meantime, remains propped up by the ongoing funding stress, which has been behind the sharp increase in the demand for the currency particularly since the beginning of the week.

In the US data space, the Philly Fed manufacturing gauge will be in centre stage along with the usual weekly Claims.

 

EUR

The Euro reversed lower against the Dollar during the Asian trading session from 1.0980 and is now trading around the 1.0875 mark.

The bounce from yesterday’s low of 1.08 ran out of steam, as the safe-haven bids around the Dollar strengthened whilst for the Euro, finding buyers on recession fears proving difficult. Also, the ECB’s decision to launch a fresh 750 billion Euros worth of QE program could additionally keep Euro buyers at bay. 

On the docket today, Eurozone’s Construction Output for January is due for release. 

 

Data to watch

12:30 – USD – Philly Fed Manufacturing index 

12:30 – USD – Unemployment Claims 

Tentative – USD – President Trump Speaks

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