The US dollar looks set to finish the week around a cent stronger than the Pound compared to where we opened and firmly within the 1.23-1.24 range. In a week where we have seen continued volatility in global markets and oil futures hit negative territory for the first time ever it is not a surprise that the Dollar is trading stronger.
As the traditional safe haven currency asset, the demand for the US Dollar will increase in times of uncertainty and making it more expensive to purchase with Pounds. At the height of the market jitters when the global coronavirus pandemic was announced this ‘flight to safety’ saw the Pound versus US Dollar rate sit at a 35 year low – 1.1409 at its lowest point.
US Jobless Claims Continue to Surge
A further 4.4 million Americans sought unemployment benefits last week amidst the economic downturn being caused by Covid-19. This brings the total number of jobless claims since the middle of March to 26.4million – 15% of the of the US workforce. This figure was slightly lower than expected and marked the third week that unemployment claims have declined, signalling that a peak in lay-offs may have been reached. This will have helped the US Dollar continue to hold it’s level against the Pound.
UK Consumer Confidence Holds Steady
UK consumer confidence held at -34 for April 1-14, its lowest level since 2009 and following the sharp decline seen in the latter half of March shown in data released by GfK this morning. The outlook for consumer confidence is unclear at GfKs client strategy director Joe Straton explaining “It is impossible to say if this is at the bottom after weeks of adjustment to the reality of lockdown life, or if further falls are to come.”
UK Retail Sales Disappointing for the Pound
UK retail sales figures also continue the current trend of record lows coming in at a drop of 5.1% in March as many shops were forced to close as the UK entered lockdown. Supermarkets were a big winner seeing demand jump over 10% as stockpiling began.
Clothing stores appear to be the biggest loser showing a drop if over 35% but it would appear that Brits are swapping clothes shipping for alcohol shopping as sales of alcohol rose over 31%.
It is clear that the short term economic outlook everywhere is bleak as we continue to navigate our way through this modern crisis, the US dollar will be the key to signal a more positive tone as risk appetite returns to trading floors we will see an unwinding of the recent Dollar strength.
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