Yesterday saw a relatively quiet day for sterling, with the currency trading in a tight range. The big news remains the budget forecast that the UK’s economy could shrink as much as 13% this year due to the coronavirus shutdown, which would be the deepest recession in three centuries. Public borrowing is also mooted to surge to its highest level since the second world war. Trade talks were reopened with the EU on Wednesday, but this was largely ignored by traders in the current climate.
The government is today expected to announce an extension to lockdown measures, which could weigh on the pound if significantly protracted.
There is no significant economic data for sterling today.
GBPUSD opened at 1.2507 and closed at 1.2543
GBPEUR opened at 1.1445 and closed at 1.1489
The US dollar has slowly recovered some lost ground, with dire retail and factory data yesterday putting the severity of the collapse in economic activity into focus. This appears to have curtailed the cautious optimism shown by investors over the past few days and saw a return to the safe haven of the dollar and a retreat from riskier currencies. US retails sales fell 8.7% in March, which is the biggest decline since tracking commenced in 1992. Similarly, a 6.3% contraction in manufacturing output represented the biggest drop since 1946.
This afternoon sees the release of unemployment claims data, which may well pour further cold water on recent improvements to market sentiment.
The euro had a wild ride versus the dollar yesterday, gaining 0.7% in early trading before losing traction by the close. The currency remained relatively stable against the pound and remains driven by external forces.
In other news, Canada’s central bank held interest rates steady at 0.25% as expected, adding provincial and corporate bonds to its quantitative easing program.
EURUSD opened at 1.0927 and closed at 1.0917
