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US jobs market implodes

GBP - British Pound

It was a stellar day for sterling yesterday as, aided by broad dollar weakness, GBP/USD rallied up to a high of 1.23 overnight a move of around six cents higher in 48 hours. The move seems to be in response to the UK's decision to lockdown the economy, pay the wages of permanently employed people to the the tune of 80% of their wages, capped at £2.5k per month, with self-employed people also getting financial cover during the crisis on similar terms in an announcement from Chancellor Rishi Sunak yesterday evening.

The UK government is throwing the kitchen sink at battling Coronavorus, although critics could say the actions are at least a couple of weeks too late in fighting the invisible enemy amongst the population. The UK has on ordered extra ventilators, testing kits and has commandeered the Excel Centre in East London which it is turning into a makeshift hospital with capacity of 4000 beds. There is also talk of the NEC in Birmingham being the next exhibition centre to be re-purposed to assist what is likely to be a deluge of Coronavirus patients in the next 2-3 weeks.

GBP/USD is now back to 1.2165. However holders of the quid will hope it can remain stable above the 1.20 handle for the foreseeable. GBP/EUR trades around 1.1040.

Key Movers

Yesterday's big news was the implosion of the US jobs market as the weekly unemployment number overshot even the worst of estimates. With millions of Americans told to stay at home in an effort to fight the spread of Coronavirus. Last week's new unemployment claims figure was always likely to be pretty dire however the actual figure shown was way worse than most had feared. An eye-watering 3.28m people filed for unemployment insurance last week around double the figure estimated. To put this into context this obliterated the previous record of 695k set in 1982 and is far worse than those experienced during national crises such as the Global Financial Crisis and in the aftermath of 9/11. Next week's number as well as Friday's Non-Farm Payrolls data will be closely eyed to see how the spread of Coronavirus is impacting the world's largest economy which now has more cases than any other, overtaking China in the past 24 hours.

Europe has announced a EUR 750b rescue package to fight the spread of the virus as the death toll continues to ratchet higher with Spain and Italy the worst affected regions. Spain's death toll now stands at 4365 with only Italy's 8215 exceeding it. Worryingly the spread of the disease in Southern Italy seems to be accelerating with many new cases reported in the poorer southern half of the country. According to the John Hopkins University and Medicine website there are now 537k cases globally and around 24k confirmed deaths.

The UK and US's peak is estimated to be around three weeks away so things are going to get worse before they get any better. EUR/USD is at 1.1080 with USD/JPY at 109. The commodity currencies have had a good end to the week with AUD/USD at 0.6065 and NZD/USD 0.5940, aided by some risk appetite returning to the market and some dollar weakness.

Expected Ranges

GBP/USD: 1.20 - 1.23 ▲

GBP/EUR: 1.0990 - 1.1140 ▲

GBP/AUD: 1.9890 - 2.02 ▲

GBP/NZD: 2.0395 - 2.06 ▲

GBP/CAD: 1.7090 - 1.7230 ▲