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Johnson's condition appears to be 'improving'

GBP - British Pound

Prime Minister Boris Johnson is "improving" after two nights in intensive care with coronavirus, Chancellor Rishi Sunak stated in the government briefing yesterday. Mr. Johnson was now sitting up in bed and "engaging positively" with the clinical team at St Thomas' Hospital in London, the chancellor added. Mr. Sunak also said a Cobra meeting today would discuss "the approach" to take in reviewing lockdown measures. Deaths reported overnight were at 938 with 7,097 now reported in the UK. Though the daily rise in deaths was larger than the previous highest toll of 786 - on Tuesday - the deputy chief scientific adviser, Prof Dame Angela McLean, said new cases were not "accelerating out of control". This could provide some respite for the pound sterling, with signs it might break 1.24 versus the USD and 1.14 versus the Euro this morning.

After a quiet week on the data front, UK industrial production, trade and monthly GDP numbers are also due for release today, and with UK manufacturing PMI plunging, retail sales and trade activity weakening a string of softer numbers are expected that could reverse the recent confidence in sterling and send it significantly lower again.

Key Movers

US equities traded higher after Dr. Fauci, the US’ Director of National Institute of Allergy and Infectious Diseases said there could be a COVID-19 turnaround next week. Fauci, in his press conference with President Trump yesterday, noted that the US death toll is now lower than initially thought, a sign that the curve may be flattening. The response in currencies have been mixed with the US dollar strengthening against the Euro, Canadian dollar, Swiss Franc and Japanese Yen but slipping against Sterling, the Australian and New Zealand dollars. This price action suggests that investors are not convinced that Fauci's comments are sustainable particularly after New York State reported the largest daily increase in positive cases to date.

On Tuesday, President Trump talked about reopening parts of the economy in 4 to 6 weeks which is possible, but that doesn’t diminish the damage done to corporate sector which will take time to recover. The good news is that the US can watch China’s comeback and how their process of restarting social and economic activity affects the number of COVID-19 cases. If the country successfully avoids a second wave, there’s hope for the rest of the world but if the number of cases surge, forcing parts of the country back into lockdown, then it would be safe to assume that a restart of the US economy will be delayed as well.

Today could see some big moves in the exchange rates. The US dollar remains in focus with jobless claims, inflation and consumer sentiment numbers scheduled release. Between lower oil prices and a strong dollar, PPI is expected to slide. The University of Michigan sentiment index should also fall sharply as states settle into lockdown mode, but its the eye-watering US unemployment figure that is of particular concern. This could see a figure of 5 million more Americans claiming unemployment this week, which could return the US Dollar to its safe haven status quickly and strengthen.

The weakest currency yesterday was the Euro. Spain reported the highest daily increase in coronavirus cases and deaths in 4 days. The ECB said they have obligation to keep rates low for a long period of time while leading Germany economic forecast institutes see the economy shrinking as much as 10% in the second quarter. German trade numbers are due for release today – softer data could accelerate the slide in the currency.

Expected Ranges

GBP/USD: 1.2340 - 1.2430 ▼

GBP/EUR: 1.1370 - 1.1425 ▲

EUR/USD: 1.0840 - 1.0900 ▲

GBP/AUD: 1.9880 - 2.0020 ▼

GBP/NZD: 2.0450 - 2.0720 ▼