Dire preliminary April PMI data yesterday failed to dampen the pound as the currency held firm throughout the day, even managing to make a short-lived afternoon bounce against the dollar. It appears that markets are immune to economic fallout data and have made large pricing allowances already.
The Flash UK Composite Purchasing Managers’ Index (PMI) crashed to a record low of 12.9 from 36.0 in March. This is not even in the same ballpark as the weakest forecast, which had indicated a reading of 31.4. This margin of collapse all but guarantees a massive contraction in the UK economy and will fuel the doubts over whether the government reacted quickly enough with business aid at the outset of the crisis. Meanwhile, Bank of England official Jan Vlighe said that Britain’s economy was experiencing possibly its deepest economic shock in several centuries and a quick recovery once the lockdown eases was unlikely.
Retail sales data this morning has come in worse than forecast, but has also failed to move the pound.
GBPUSD opened at 1.2352, peaking briefly at 1.2406 early afternoon, before closing back at 1.2341
GBPEUR opened at 1.1441 and had marginal movement, closing at 1.1449
The US dollar sits near a two-and-a-half week high against a basket of currencies and is 0.9% stronger for the week, despite a short-lived negative reaction to worse-than-expected Unemployment and Manufacturing PMI data yesterday. Risk sentiment continues to drop as more and more dire economic data is released, which strengthens the world’s premier safe-haven currency.
Preliminary goods-orders data in the US this afternoon is unlikely to change investor strategy heading into the weekend.
Yesterday saw a video summit of EU leaders, to discuss a cohesive financial bailout to tackle the economic fallout from the crisis. Despite a tentative agreement to build a trillion euro emergency fund, the details of this were left for a later date and it failed to satisfy investor concerns.
French President Emmanuel Macron said differences continue between EU governments over whether the fund should be transferring grant money, or simply making loans. The meeting did little to assuage market fears over the discord among the group. The bloc faces a cut to output as deep as 15%, according to the European Central Bank.
Despite this, the single currency broadly held firm throughout Thursday.
EURUSD opened at 1.0796 and closed at 1.0777