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Pound undermined by weaker risk

Pound undermined by weaker risk

GBP

UK economic confidence remained very fragile especially following the OBR forecast second quarter GDP to shrink by 35% compared to 12 months ago. Weaker risk appetite also undermined Pound sentiment as did the pressure for a correction after significant gains in recent times. The Euro clawed back to 1.1430 before fading to 1.1500 and the Dollar strengthened to 1.2450 as volatility rose before falling back to 1.2550 near the European close. 

Overnight the British Retail Consortium like-for-like retail sales recorded a 3.5% annual decline in retail sales for March, but there was a 27% drop in the first two weeks of lockdown measures.This morning weak risk appetite persists and the Pound kicks off below the 1.2500 on the Dollar as choppy trading conditions remain.

 

 

USD

Headline US retail sales declined a record 8.7% for March after a 0.4% decline in February and weaker than market expectations of a 8.0% decline as clothing and leisure spending slumped and more than offset strong increases in food purchases. Underlying sales declined 4.5% on the month as auto sales slid over 25%. Given the timing of US lockdown measures, the April sales decline is liable to be much sharper.

The New York manufacturing index collapsed to a record low of -78.2 for April from -21.5 previously and was well below the previous all-time low as new orders declined sharply while inflation pressures fell sharply. Employment also declined, although companies did expect a slight recovery on a 6-month view. Industrial production declined 5.4% for March with a 6.4% dip in manufacturing output. The NAHB housing index declined to 30 from 72 previously.

The dollar gained fresh support in an immediate reaction to the data releases as fears over the US and global outlook triggered a fresh spike in dollar demand. The Euro declined sharply against the USD to lows just below 1.0860 as commodity currencies also came under strong pressure.

EUR

EU Commission head Ursula Von der Leyen has called for a gradual approach in lifting containment measures as markets monitored announcements from national governments whilst German Chancellor Merkel also confirmed social distancing measures will stay in force until May 3rd but small shops will be allowed to open from next week. 

The Euro recovered some ground on relaxation hopes as the Dollar lost support later in the session with the common currency recovering to just above 1.0935.  As of writing the Euro currently trades at 1.0875 against its U.S counterpart.

 

Data to watch

08:30 – GBP – BOE Credit Conditions survey

12:30 – USD – Unemployment claims 

12:30 – USD – Building Permits 

12:30 – USD – Philly Fed Manufacturing Index

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