Pound slides as markets remain nervous
The news that another Cabinet Minister, Michael Gove, would self-isolate for 14 days and further deplete key government staffing unsettled the Pound. Support was gained from reports that Boris Johnson’s condition was stable and didn’t require a ventilator. Markets will remain wary however, as health reports on Monday proved inaccurate with the PM being rushed to hospital. Medical officers were also keen to reassure that the current outbreak wasn’t accelerating despite another 786 reported UK deaths.
Stronger global risk appetite and strong demand at the latest gilt (government bond) auctions also underpinned market sentiment. The Pound peaked near 1.2385 on the Dollar and the Euro climbed to 1.1325. There were further concerns over economic damage with reports that only 1% of companies had successfully accessed financial help from the government. The Pound opens just above 1.2300 against the Dollar and 1.1340 against the Euro.
The US NFIB small-business confidence index declined to 96.4 for March from 104.5 previously, the sharpest monthly decline in the survey’s history and the weakest reading since October 2016 as the coronavirus impact started to bite. The survey also reported that companies faced difficulties in submitting loan applications which will increase the risk of sustained economic damage. The IBD consumer confidence index declined to 47.8 from 53.9 previously while the JOLTS job-openings data recorded a decline to 6.88mn at the end of February from a revised 7.01mn previously.
Overall US dollar demand remained weaker as risk appetite strengthened and the Euro advanced strongly against he USD to highs around 1.0925 before fading slightly. A sharp rise in US coronavirus-related deaths and mixed data from Europe unsettled confidence.
Eurogroup, a group of the European Union finance ministers, is expected to resume on Thursday after ministers failed to agree on a common text over the coronavirus response following their meeting that ran over 13 hours. The major factor being a EUR500bn support package to underpin the Euro-zone economy and help finance a recovery.
Source reports indicated that work towards an ambitious response had not yet been completed and the resignation of the European Research Council President reinforced unease. As of writing the Euro trades around the 1.0840 level against its Dollar counterpart.
Data to watch
Day 2 – EUR – Eurogroup Meetings
Tentative – USD – FOMC Meeting Minutes