Sterling rallies to one-week high as European cases ease

Sterling rallied to its strongest position in around a week against the US dollar during Asian trading this morning, briefly moving back above the 1.24 mark.
News that PM Boris Johnson is ‘clinically stable’ in intensive care, and both breathing unassisted and sitting up in his bed, has provided some relief for currency traders. The move higher in the pound has also been helped by a general uptick in risk appetite fuelled by optimism that cases of the COVID-19 virus appear to be easing in Europe. Other than a sharp spike witnessed in cases on 3rd April, which was driven entirely by a change in reporting standards in France, new daily cases of the COVID-19 virus in the big four European countries (also including Germany, Italy and Spain) have clearly levelled off in the past week or so- an encouraging sign.

US cases, meanwhile, continue to arise at an aggressive pace , with the number of deaths spiking to new highs near 2,000 a day in the past two days. While there are some signs that the containment measures are working, it is far too soon to say whether or not a peak in cases has been reached – it is highly likely that it hasn’t given the ongoing ramping up of testing being conducted.

This trend of rising cases in the US and easing cases in Europe has also been broadly supportive of the common currency, which has been trading comfortably around the 1.08-1.09 range in the past few days. Should this trend continue in the coming days then we may see a bit more sustained support for the euro in the immediate-term.

Will today’s jobless claims data shift the US dollar?

Activity in the markets is expected to be high today leading up to the long Easter weekend. A number of US economic data releases will be in the spotlight this afternoon, including the now all-important jobless claims data. This data point has gone from being one of the more obscure economic prints on the calendar to just about the most vital, given that it provides the most timely measure as to how the US labour market is performing during the crisis. Following the last two weeks of data, another sky-high reading into the millions is expected. Whether we see another fresh record high is almost anyone’s guess – the market is pencilling in a reading just north of 5 million, although these estimates have proved way off so far. Any number significantly above this would be another big warning sign that the impact of the virus on the US labour market will be a catastrophic one.

Other than that, we will be paying close attention to the March producer inflation numbers and the Michigan consumer sentiment index, both of which cover to crisis period.

2020-04-09T09:38:02+00:00 April 9th, 2020|