IFX Market Report: Friday 27th March 2020

The pound made its biggest daily gain in three years on Thursday, jumping more than 2% as poor U.S. unemployment data weakened the dollar. The pound was last trading above $1.21, after falling as low as $1.14 last week, levels not seen since 1985. It is heading for its best week since 2009, up 4% since Monday.

In recent weeks the pound has suffered as fears about the economic impact of the coronavirus pandemic sent investors scrambling for dollars, seen as a safe haven in times of crisis. Despite its recent rally, the pound is still down nearly 11 cents from its early March high of $1.32. The pound was last up 2.3%, changing hands at $1.2145. Against the euro, the pound was up 1% at 90.775 pence.

A $2 trillion stimulus package agreed by US politicians to shield the world’s biggest economy, and coordinated action by central banks including the BoE to boost the supply of dollars has helped ease stress in money markets and some of the selling pressure on the British currency.

Analysts say sterling’s fortunes are tied to broader market sentiment, which has improved markedly in recent days as investors cheer the stimulus plans.

GBPUSD opened at 1.1913 and climbed across the day, closing at a high of 1.2170

GBPEUR opened at 1.0907 at rose across the day to close at a high of 1.1022

The dollar dropped broadly on Thursday after an unprecedented rise in jobless claims led investors to anticipate that the US government and Federal Reserve would take new steps to stimulate the economy.

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week. Strict measures to contain the coronavirus pandemic brought the country to a sudden halt, unleashing a wave of layoffs that likely ended the most extended employment boom in U.S. history.

House Speaker Nancy Pelosi said the next step would be legislation to address family leave, pensions, food aid and more assistance to state and local government. She said that there is no question that more money will be needed.

The Federal Reserve last week launched new bond purchase and lending programs to ease market logjams. It also committed to swapping dollars for foreign currencies with other major central banks after a desperate scramble for the U.S. dollar last week sent it to three-year highs against the euro, 35-year highs against sterling and 17-year highs against the Australian dollar.

The euro jumped 1.42% against the greenback to $1.1034. The dollar weakened 1.57% against the Japanese yen to 109.44 yen. The Australian dollar gained 2.00% to $0.6077.

But many analysts see volatility in markets persisting until the worst of the virus and its effects have passed.

EURUSD opened at 1.0922 and climbed to close at a high of 1.1031

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