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UK remains on lockdown as Europe eases

UK remains on lockdown as Europe eases

GBP

A healthier risk global appetite helped to support the Pound in the run up to the Easter Bank Holiday weekend. Sterling capitalised on a weaker Dollar to move above the 1.2400 mark. The UK market was closed on Friday but Sterling held steady as global moves dominated. Over the weekend the Prime Minister was discharged from hospital, but overall the UK death toll has reached 11,000.  Yesterday the Pound rose above the 1.2500 level on the Dollar, assisted by thin trading volumes and as further gains in commodity currencies. The Euro also declined sharply, reaching monthly lows near 1.1500.

Markets remain very uneasy over the economic outlook, expecting that Q2 figures will show a very sharp decline. The Treasury department has been pressing for lockdown measures to be eased to protect the economy, but for now at least the lockdown will continue. This morning a stronger risk appetite had supported the Pound, the Euro was held just above 1.1500 and the Dollar at fresh 1-month highs near 1.2550.

 

USD

US initial jobless claims declined only marginally to 6.60mn in the latest week from an upwardly-revised 6.87mn the previous week with an increase over 18.5mn in the latest 3-week period, maintaining fears over the outlook and deep GDP contraction in the short term.

The Federal Reserve (Fed) announced a further $2.3trn support package for the economy. There will be a new $600bn loan package for small business with interest and principal payments suspended for 12 months. The Fed will also buy further assets including mortgage-backed securities and Chair Powell reiterated that the bank was prepared to take further action if necessary. The dollar moved lower after the announcement, especially as risk appetite improved further.

US consumer prices declined 0.4% for March with the year-on-year rate at 1.5% from 2.4% previously and below census estimates of 1.6% as energy prices declined sharply. The core rate declined to 2.1% from 2.3% previously. With a weaker dollar tone, the Euro against the USD pushed to highs above 1.0950.

 

EUR

The Eurogroup finally approved a 540 billion Euro support package for the Euro-zone economy. There was however, no official backing for coronabonds, but the rhetoric was sufficiently flexible. It’s now up to EU leaders to approve the accord, which will require overcoming profound political disagreements. Ministers also agreed to work on a temporary fund that would help kick-start the recovery and support the hardest-hit countries. The ability to reach some form of agreement supported Euro sentiment with a move back above 1.0925 against the Dollar.

With market conditions very thin on Monday, the common currency was unable to make headway against its U.S counterpart and retreated back down to the lows of 1.09 area. Being hampered once again by potential travel restrictions that could remain in place until at least October. As of writing the Euro is trading slightly above the 1.0920 level against the Dollar. 

 

Data to watch

All Day – All Currencies – G7 Meetings 

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