The Pound vulnerable as markets go into meltdown

Hi everyone,

Well where do we start..

Whatever your personal view on the coronavirus, global markets are worried stiff. Oil prices fell by 30% earlier today, which is the worst loss since the Gulf war in 1991. 19 FTSE 100 companies have lost 10% of their value, Shell & BP have lost 21% & 18% respectively. 

The price of oil reflects on how well the global economy is performing and this significant drop, could mean tough times ahead. If there is a rapid decline in consumer spending and demand for travel (likely), there will be a global recession. 

£-€ rates last week saw its 4th consecutive weekly loss and today hit a 5-month low before rebounding. The £-$ has gathered some momentum and should continue to rise in the coming days. It has been a dramatic day so far and below some of the gains/losses seen this morning;

GBP/EUR
-1%
GBP/JPY -2.5%
GBP/CHF -0.7%
GBP/NOK +3%
GBP/CAD +2%
GBP/MXN +8%

There is no doubt that with Italy pretty much in quarantine over the coronavirus, they will be slipping into a recession fast. With an already under-pressure economy and travel into the country now limited. Businesses will take a huge hit in the coming weeks/months and the ECB will have to act, which either way will weaken the Euro when the time comes. 

For now, the Euro is in the driving seat as investors inflate the single currency demand. But, the Euro-zone relies heavily on exporting and if there are no buyers, they will be in big trouble, which is the outcome most are expecting in the end. 

The warning is near-term for £-€ rates. The UK is heavily reliant on foreign capital into the economy and with global investors staying away, the Pound could soon be dealt a double-blow.


 

 

 

Upcoming Data
 

 

Tuesday, 10th March, 2020


10:00 EU - Euro-Zone GDP
 

Wednesday, 11th March, 2020


09:30 UK - Manufacturing, construction & industrial production, trade balance
11:00 US - Mortgage application
11:30 UK - UK budget
12:30 US - CPI & average earnings
14:30 US - Crude oil inventories
18:00 US - Monthly budget statement 


Thursday, 12th March, 2020


00:00 UK - House prices
10:00 EU - Euro-Zone industrial production
12:30 US - Jobless claims
12:45 EU - ECB rate decision


Friday, 13th March, 2020

 
07:00 EU - German CPI
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Dan Waterman
Office Manager

 
 
 


 

 
 
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