Pound falls from 3-week high vs euro
[vc_row][vc_column][vc_column_text]The rising number of coronavirus infections and deaths in the UK, coupled with a concerning slump in service sector output, put the pound under pressure towards the end of last week.
Political squabbles within the Eurozone put a dampener on the euro, meanwhile, as Germany dug in its heels over a proposed shared debt scheme dubbed ‘coronabonds’.
Even though the US jobless rate jumped sharply in March, delivering an unprecedented increase in unemployment, this was not enough to undermine the safe-haven US dollar.
Finally, both the Australian and New Zealand dollars struggled to hold their ground in the face of the latest wave of global risk aversion.
While the initial March services PMI reading had shown a sharp loss of economic momentum the index’s downward revision still weighed heavily on GBP exchange rates.
As the service sector remains the primary driving force of the UK economy this evidence of a deeper decline saw the pound fall out of favour once again.
Although the corresponding manufacturing PMI saw a slight upward revision this failed to ease anxiety over the economic outlook.
With the fallout of the Covid-19 lockdown looking set to hang over the economy for the foreseeable future the potential for GBP exchange rate gains rapidly diminished.
The release of February’s monthly gross domestic product reading could offer the pound a temporary boost, however.
As growth is expected to show a modest 0.1% uptick on the month this may help to put a floor under GBP exchange rates.
If the growth rate stagnates for another month, though, this would add to expectations of a significant slump in the upcoming first quarter gross domestic product and leave the pound vulnerable to selling pressure.
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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