- US jobless will be first economic data to reflect COVID-19 impact
- US Senate passes $2.2 trillion support package
No one can be surprised that business and consumer sentiment is weaker and that housing and car sales will virtually stop. That is inevitable when people are confined to their homes and businesses are told not to operate. So economic data from Germany showing significant declines in business expectations and conditions were largely ignored yesterday.
Positive economic data from the US
By way of contrast, US durable goods orders were actually up in February but the March data will be worse. What we did see though was an unexpected decline in US crude oil stocks. That tends to strengthen the price of oil and weaken the USD but, as was mentioned yesterday, all bets are off on data because everyone is hanging on the words of Health Ministers, desperate for the news that this virus is being controlled or in decline. We can but dream.
Today’s economic data in the UK
Today’s set of data to ignore will be the UK retail sales numbers for February. As above, the March data will most likely be record breaking and not in a good way. The exclusions to that will be sales of loo rolls and hand washing options.
Bank of England meeting today
The Bank of England (BOE) will meet today by one means or another and will leave everything unchanged after two shock rate cuts earlier in the month and a serious amount of cash injection into the markets. The Government’s actions to keep the economy afloat threw a curve ball into the BOE’s forecasting and we have yet to see any impact of the rate cuts because no one can get a loan anyway.
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Today’s economic data from the US
US data today includes the US economic growth data for Q4 2019. That is almost entirely irrelevant now after the events of Q1 2020 but we will also have the initial jobless claims for the last week. The previous week’s number was 281,000. We are forecasting this week’s to be upwards of a million and whilst that is entirely understandable, seeing it will send another shock through the markets. Perversely, that ought to strengthen the USD once again.
US Dollar strengthened on $2.2 trillion support package
The USD strengthened a little after the US Senate passed a $2.2 trillion bill to support the economy; including sending cash to all tax payers. I can’t help thinking that would have been more positively received if the President didn’t let slip that he was so desperate to keep the US open for business so he wins the next election.
Negative economic data for New Zealand
Elsewhere, we have seen dire forecasts for the New Zealand economy. Unemployment rising to 10% and economic contraction on a record breaking scale are some of the headlines. The New Zealand Dollar is remarkably strong – especially compared to its Australian counterpart, but weakness will ensue if any or all of these forecasts start to be proven true.
Sterling’s value today
So we start Thursday – or Lockdown Day 3 as we may think of it in the UK – with the Pound buying EUR 1.0850. It did spike above 1.10 yesterday but that was a short lived movement, probably sparked by some profit taking. The Pound also spiked against the USD yesterday but is back to $1.1830 this morning. We can see this is US Dollar related because the Australian and New Zealand Dollars are weaker again A$ 1.99 and NZ$ 2.0330. However the Pound – Japanese Yen exchange rate was down at 126 last week and is back up to 131.
And with all these ‘celebrities’ posting uplifting videos and bands doing online concerts to cheer us all up, I was warmed by James Blunt who tweeted, “During lockdown, while many other artists are doing mini-concerts from their homes, I thought I’d do you all a favour and not.” Keeping it classy James.
There is a lot of volatility and economic data this week and Sterling is expected to remain under pressure. This could affect your currency trading. Contact our currency experts or fill in the form below to ensure you get the best value for your money.