IFX Market Report: Monday 27th April 2020

Friday saw a very quiet day across the board, after sterling opened on the back foot in response to data showing a record drop in retail sales. Official figures showed sales volumes fell by 5.1% in March against a median forecast of 4.0%, which reflects the impact of the shutdown in the second half of the month.

A separate survey showed UK consumer confidence remained at its lowest since 2009 this month, following its rapid decline in late March.

Whilst poor data will continue to poor in for the pound as a result of the crisis, there is a degree of resilience and a lack of reaction. Arguably, dire economic output is already priced in to the currency and sterling has actually opened at a stronger position across the board on Monday, as hopes rise that an end to the lockdown may be in sight.

There is no financial data for the UK today, as Boris Johnson returns to the hotseat.

GBPUSD opened at 1.2315 and remained flat, closing at 1.2329

GBPEUR opened at 1.1448 and had marginal movement, closing at 1.1429

The US dollar’s rally last week was caused by a historic collapse in oil prices, which pushed crude futures into negative territory for the first time ever. As oil prices have stabilised, safe-haven appeal of the greenback has receded and the currency eased slightly versus the euro on Friday.

The focus this week will be on the Federal Reserve meeting and statement on Wednesday, although a raft of measures have already been implemented and the outcome is likely to be a holding of current stimulus initiatives.

There is nothing out of the US today.

The euro remains in a vulnerable position following the inconclusive summit last Thursday of EU leaders, to try to agree an economic way forward in the current crisis. All eyes will now be on the ECB meeting this coming Thursday, where the central bank may well announce an extension to its debt purchases to include junk bonds. Some investors are concerned that this decision could widen rifts between EU members.

The single currency did manage to make marginal gains versus a weaker dollar on Friday.

EURUSD opened at 1.0758 and closed at 1.0788

In other news, the Bank of Japan this morning expanded stimulus to help companies hit by the coronavirus crisis, whilst keeping interest rates on hold at 0.10%. The decision to remove limits on its government bond purchases and increase corporate debt buying was widely expected and puts it in line with other major central banks.

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