IFX Market Report: Tuesday 28th April 2020

There was little happening throughout the day yesterday, with a lack of data and any notable news meaning the pound changed hands with little price deviation.

However, there are positive signs for sterling with Boris Johnson fully recovered from the virus and a downward trend in the number of new cases being hospitalized. Improving global risk appetite and hopes that lockdown measures may start to be eased could bolster the pound. It should be noted that sterling is up in early trading today.

The Prime Minister did strike a cautionary tone yesterday, saying that a second wave of the virus would be deadly from both a health and economic viewpoint and lockdown easing will need to be closely managed.

Trade talks between the EU and UK continue via teleconferencing, with the government maintaining that it will not extend the transition period beyond the December 2020 deadline, even if a deal has not been reached.

There is no meaningful economic data today for the UK.

GBPUSD opened at 1.2427 and was down slightly, closing at 1.2409

GBPEUR opened at 1.1455, closing at 1.1463

In the US, a number of states have eased restrictions on businesses and more appear ready to follow suit. The dollar has been responding to global risk appetite and has eased this morning as hopes once again rise that an end to the pandemic may be in sight.

Markets are looking for any forward guidance from the Fed central bank, which meets later on today and is due to issue a statement on Wednesday. The US has led the global monetary policy response to the crisis by cutting interest rates to zero and aggressively buying bonds and corporate credit. This was extended overnight to include municipal debt of smaller US cities.

The ECB, in contrast has had less room to manoeuvre on rates and, whilst announcing a sizeable bond-buying program, has yet to present a cohesive plan of action. All eyes will, therefore, be on the central bank meeting on Thursday.

Italy, which has the world’s second-highest rate of coronavirus deaths, is among countries that have laid out plans to allow businesses to reopen, following the country maintaining its BBB credit rating on Friday when markets had expected a downgrade.

EURUSD opened at 1.0848 and closed at 1.0825

In other news, the Swedish crown climbed to a six-week high against the euro after the Riksbank held its benchmark rate unchanged at 0%, as expected, making no major changes to its package of measures in place. Unlike the majority of central banks around the globe, Sweden has held its benchmark rate unchanged, arguing that it is better to focus on credit supply and to counteract a rise in interest rates to households and companies.

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