The pound has gathered some momentum during today’s trading session and is currently sitting around the 1.25 level, the best level for the pound since the middle of this month. Resistance sits around 1.2525, the high at this time and we need to wait and see whether there is enough of a boost to push through this marker.
Risk appetite is beginning to creep back into the market as the number of coronavirus related deaths continues to fall and we get further insight in to plans in many countries to ease the lockdown restrictions. This sees a sell off of stockpiled USD and decreases the value of USD as supply to the market is in turn increased and the Pound has been able to benefit from this so far today.
The Dollar Impacted as Oil Prices Continue to Tumble
The Oil market continues to be hard hit as consumer demand has dropped at an unprecedented rate on a global scale. With travel restrictions in place across continents, planes grounded, and factories closed, the demand for oil has taken a nosedive.
This sudden shock to the market has already seen us navigate through negative oil prices (where producers pay for you to take their oil) and leaves a very uncertain outlook for the industry. “Our industry has been hit by supply and demand shocks on a scale never seen before,” BP CEO Bernard Looney said in a statement after the oil major reported a 66% plunge in first quarter profit to $800 million compared to a year prior.
Demand For Oil Could Completely Freeze Within the Next Month – Goldman Sachs
Global oil storage could reach capacity within the next month as oil reserves have been fully stocked amidst the price collapse. Goldman Sachs is reported to have told a client that this is likely to happen as early as mid-May and would see a further reduction in demand. Hitting the storage limit would cause unprecedented uncertainty in the oil markets and lead to high levels of volatility. This will filter through to the USD, the currency of choice for oil purchases and could swing the price of the currency either way. On one hand, the demand for USD will continue to fall inline with the dropping demand for oil however, this market uncertainty could well trigger a second round of safe-haven buying and could push the USD value higher.
As always, the currency markets remain impossible to predict and many factors continue to effect the value of the pound versus the dollar. To discuss why the price of oil has such a profound impact on global currency, and potentially your currency exchange, get in touch using the form below. I’ll be happy to get in touch to discuss your enquiry.