Daily Currency Update

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Markets recover after oil crash

GBP - British Pound

After yesterday's oil driven stock market blood-bath, things have recovered somewhat today after the dramatic swings in asset prices throughout Monday. In the face of all this turmoil the pound has held up relatively well given its neither seen as a traditional risk asset and the relatively slow pace of coronavirus infections detected in the UK so far compared to other countries around the world. In a hugely dramatic Asian session on Monday morning, GBP/USD topped out around 1.32 with GBP/EUR up to 1.1550 before sterling retraced against both.

Tomorrow sees the UK budget at lunchtime with big spending plans that were forecast a month ago likely to be pared back and Coronavirus contingency measures likely to be the main area of focus. With the official infection rate now standing at 319 and five deaths confirmed, the UK is bearing up relatively well compared to other countries, however the situation is likely to get a lot worse before it gets any better with the current "containment" phase likely to be changed to "delay" over the next week or so. GBP/USD currently trades at 1.3070 with GBP/EUR at 1.1495.

Key Movers

Coronavirus continues to dominate the news with Italy's decision to quarantine the whole country making headlines around the world. After requesting all residents stay indoors in several northern provinces including the northern powerhouse of Lombardy, the ban on movement has been extended nationwide as Italian Prime Minister, Giuseppe Conte fights to control the outbreak which has so far infected over 9000 people and led to 463 deaths. All top flight football has been postponed until early April including all domestic Series A matches, however those clubs involved in European competitions will be allowed to play behind closed doors. Saturday's 6 nations rugby match between France v Ireland in Paris has been postponed and it seems inevitable more and more sports events and public gatherings/concerts etc will be cancelled over the coming weeks.

The market turmoil experienced yesterday which saw a close to three decade record move in the price of oil and the yen surge across the board seems to have calmed a little with the price of Brent recovering from around $31pb to around $36pb at present. The fall from Friday's close of $45.5pb was the biggest drop since 1991 as Russia declined OPECs request to cut output which in turn enraged Saudi Arabia leading to it to declare it would up output, in effect declaring a price war. This sent shock waves through equity markets which saw US stock markets trigger circuit breakers after falling 7% in early trading yesterday. This led to a 15 minute pause in trading, the first time this has happened since Dec 2008. USD/JPY fell close to 101 for the first time since late 2016 as investors flocked to safety. Gold also remains around a seven year high, just under $1700 an ounce.

Ongoing Covid-19 developments will continue to develop the news however from a monetary policy perspective. Thursday's interest rate decision from the European Central Bank will be one to keep an eye on. With little room to manoeuvre the euro has remained relatively elevated despite the unprecedented events in Italy. It seems however there could be a call to arms from ECB chief Christine Lagarde for governments to temporarily relax fiscal policy in an effort to stave off recession and help those affected by the worsening crisis. EUR/USD trades at 1.1360.

Expected Ranges

GBP/USD: 1.32 - 1.30 ▼

GBP/EUR: 1.14 - 1.1550 ▼

GBP/AUD: 1.9820 - 2.0010 ▼

GBP/NZD: 2.0580 - 2.0770 ▼

GBP/CAD: 1.7780 - 1.7960 ▼