Daily Currency Update

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Federal Reserve cuts interest rates again

GBP - British Pound

The Federal Reserve will be thanking their decisions over the last number of years to go against the grain and raise rates, particularly between 2016-2018. This is because they have cut rates again by a further 100 basis points and restarted its large quantitative easing package by purchasing $700bn worth of US treasuries and mortgage backed securities. To stress how critical this is, the Fed decided that it couldn't wait until Wednesday when they were due to meet and the central bank have never cut rates by such an extent in one go, not even during the GFC.

In a Bretton Woods style move on Sunday there was a coordinated effort globally with the ECB, Bank of England, Bank of Japan, SNB and Bank of Canada all throwing the kitchen sink at the coronavirus by increasing liquidity for the US dollar with a host of these central banks also cutting their own rates. The Bank of England is also expected to cut rates to 0.1% later this month now.

The impact on currencies has been widespread and the pound has now lost 7 cents against the USD in the last week alone with GBP/USD 1.20 looming on the horizon. There is a big shift still towards safe havens with the Japanese Yen and US Treasuries in particular benefiting but interestingly the Euro is proving very buoyant still.

Key Movers

To provide an indication of the possible global recession that is around the corner, China overnight released a raft of economic data which was bruising. Industrial production was down 13%, fixed asset investment was down 24.5% and retail sales down 20.5%.

Its difficult to pick out exactly what to look out for in the week ahead but be aware of any further rate cuts/updates from the BoE or ECB. News across the pond that several large brands including Apple and Nike are closing stores in order to protect staff largely undermine the efforts of central banks whose policies are designed to encourage lending and spending. Hopefully we don't see anymore of these updates.

Expected Ranges

GBP/USD: 1.2170 - 1.2400 ▼

GBP/EUR: 1.0870 - 1.1170 ▼

GBP/AUD: 1.9770 - 2.0280 ▲

GBP/CAD: 1.6890 - 1.7285 ▲

GBP/NZD: 2.0270 - 2.0650 ▲