Sterling struggles to maintain it’s upside momentum versus the US dollar today as the high volatility seen over the past three weeks has appeared, for the time being at least, to calm. Although the currency markets have seen some respite there is still plenty of volatility elsewhere as UK bank stocks begin to tumble. Caving in to pressure last night, Natwest, Lloyds, HSBC, Barclays, Nationwide, Standard Charter, Santander and RBS have all agreed to cancel dividend payouts in an order to have maximum funds available to support businesses in the wake of the coronavirus pandemic.
UK GDP Yesterday
The pound had been looking sharper across most currencies yesterday as GDP figures matched expectations for Q4 2019. Posting a flat 0% means that the UK economy was able to economically weather the uncertainty of Brexit and start 2020 with 1.1% GDP for 2019.
Looking forward there is far less confidence and the British Chamber of Commerce highlight their own concerns as “the disruptive impact of Coronavirus is expected to weigh significantly on key drivers of UK GDP growth through the first half of 2020. A lack of clarity on the UK’s future trading relationship with the EU and other partners around the world and a struggling global economy is also predicted to limit UK’s near-term growth prospects.” The pounds recovery of 9 cents against the dollar appears impressive given this lack of optimism.
UK manufacturing output confirmed fears this morning slumping to its slowest rate in 8 years as output and new orders were immediately impacted by the spread of coronavirus.
US Unemployment and Manufacturing
For the US, fears on unemployment reaching up to 20pc are still ringing in our ears with initial jobless claims rising sharply. However, this afternoons ADP employment release showed a fall of 27,000 jobs for for March, its first negative release since September 2017 but a much more positive reading than the anticipated fall of around 150,000. The pound / US dollar rate remains robust around it’s comfortable 1.23 – 1.24 day trading range.
Currency markets appear to have gained more confidence in a swift recovery from the current pandemic as risk appetite returning has seen the pound increase in value whilst the US dollar has decreased as we see an unwind of the ‘flight to safety’ we experienced in dramatic style in March, economic indicators and all important business confidence could take a little longer to recover.
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