Currency Note

US economy contracts at fastest rate since 2008

By Alexander Fordham April 30th, 2020

The dollar is down against the pound this morning, after figures showed the US economy contracted by almost 5%, reaching a 12-year low not seen since the financial crisis.

The euro has made slight gains against the pound, bolstered by talk of further stimulus from the European Central Bank and the announcing of plans for slowly easing lockdown in France and Spain.

Today is a busy day for economic releases. It has begun with Spanish GDP figures early this morning, which show the country’s economy to continue to decline. In Germany, the Economy Minister has warned of the potential for the ‘worst recession in the Federal Republic [of Germany]’s history’.

So can anyone really predict what’s ahead for the currency markets? Read our latest quarterly forecast for April-June and beyond to find out what the major banks are predicting – and what you can do with this information to protect your capital.

GBP: Pound down as uncertainty over lockdown continues

The pound is weaker against the euro, after losing ground yesterday following poor retail sales data on Monday. Yesterday saw little in the way of economic releases, with more movement perhaps coming from fears over the economic impact of coronavirus. For Boris Johnson, it’s something of a tightrope between public health and the economy, and businesses have been calling for further information on when lockdown will be eased.

From To

 

EUR: Markets await ECB press conference

Today is an important day for the eurozone, with early pressure on the euro coming from this morning’s poor GDP readings from Spain. Later on today, Eurozone GDP is also expected to enter the negative. The European Central Bank is expected to announce, or at least indicate a future scaling-up of its bond-buying programme, while keeping interest rates – already at historic lows – untouched.

Yesterday saw the euro make slight gains against the pound, with poor data readings largely priced in by the markets. Industrial and services sentiment both declined faster than expected, while business confidence also dropped further. On the hand, German inflation came in better than forecast, although the country’s government is worried about the future of its economy. The Minister for the Economy, Peter Altmaier, said yesterday that the Federal Republic will ‘experience the worst recession in [its] history’.

USD: Economy shrinks at same speed as in the financial crisis

The US economy is shrinking at the same pace as in 2008, the latest figures show, hitting an annual rate of -4.8% and ending the record six years of expansion. It comes as consumer spending dropped 7.6% in the first quarter of the year and home sales dropped 16%.

Today will see further economic indicators, including jobless claims, expected to hit over 19 million, and person income figures, expected to enter the negative. Tomorrow, we will also see manufacturing PMI figures.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.