UK lockdown extended
The Pound was constrained within a tight range throughout yesterday’s European trading session, with little change in risk appetite, no data and no real news. Moves above 1.2500 against the Dollar attracted selling interest and the Euro consolidated near 1.1500.
Bank of England Monetary Policy Committee member Silvana Tenreyro stated that the current monetary policy will offset inflationary weakness but it was impossible to predict the future path for monetary policy.
Towards the end of the trading day a stronger Dollar pushed the Pound to lows below 1.2420 and the UK government stated that lockdown measures will be extended for another three weeks. This morning risk appetite seems healthier and has assisted the Pound in climbing back towards 1.2500 on the Dollar and 1.1500 against the Euro. There is no significant UK data expected today.
US initial jobless claims declined to 5.25mn for the latest week from a revised 6.62mn the previous week, although slightly above consensus forecasts of 5.15mn. Continuing claims increased to 12.0mn from 7.45mn the previous week, but below market expectations. The jobless claims data overall suggested that the unemployment rate will increase to well above the 10% level, probably within the jobs report for April which will be released in early May.
The Philadelphia Federal Reserve (Fed ) manufacturing index declined sharply to -56.6 for April from -12.7 previously. The figure was well below market expectations of -30.0 and the weakest reading since 1980. The new orders component slumped even further to a record low of -70.9 while unfilled orders also declined. Both prices and employment also declined sharply over the month with the lowest reading for prices paid since 2009.
The dollar dipped marginally in an initial reaction to the data, but quickly regained ground and secured significant gains later in the session with the Euro weakening to the 1.0820 area as the dollar posted strong gains. The US currency lost ground this morning as risk appetite improved and the Euro recovered to around 1.0860.
Ahead of yesterday’s U.S open, ECB President Lagarde stated that the central bank would do everything necessary within its mandate to fight the Coronavirus-crisis and is considering more swap lines to support the functioning of markets. Executive Board member Schnabel reiterated that the shape of economic recovery is uncertain. EU Commission Head Ursula Von der Leyen additionally offered an apology to Italy over a lack of support and for not intervening earlier on in the crisis. Thus leading to a narrowing of Italian yield spreads.
The Economic calendar is empty this Friday, as of writing the Euro currently trades around the 1.0835 against the Dollar.