Daily Market Outlook

Wednesday March 18th 

GBP

Chancellor Sunak, after 6 days of delivering a stimulatory budget decided to announce he would “do whatever it takes” to support the economy to combat coronavirus, announcing a ￡350 billion emergency rescue package.

The market hasn’t particularly rallied on this announcement with some analysts now suggesting that sterling has been sold because of the lax approach taken to coronavirus and its testing by the UK government.

There was news yesterday that a period of intensive testing in the Italian town of Vo, near Venice, allowed the authorities to halt the spread of the virus.

This was because the testing identified people who were carrying the virus but not showing any symptoms, who were then isolated to stop the virus spreading. On a technical basis, sterling is still probably set for lower levels in the immediate future.

EUR

German ZEW economic sentiment plunged by 58.2 points to hit -49.5. This was the largest drop since the index was produced in 1991. The last time the index was at similar extreme levels was during the financial crisis of 2008.

EUR/USD lost 1.5% on this news, combined with general US dollar safe haven buying and is now waiting for the release of Eurozone final CPI. We expect a stable reading of 1.2%, although again it is probably the US equity markets that will dictate the currency market moves.

USD

US dollar LIBOR jumped up 16.25 bps, representing the largest jump since the financial crisis of 2008. This encouraged the dollar index to jump some 1.5% higher, as the dollar was bought across the board. US retail sales in February fell 0.5% rather than the 0.2% expected.

However, it is March data that the market is looking for and that will probably be a lot worse than February’s. Later in US trading, the market took notice of suggestions that the government was going to give everyone at least US dollars 1,000 to negate the coronavirus downturn.

This certainly helped the equity markets initially, ending the day 6% higher, as they also considered news that the Trump administration said it was seeking support from Congress for this spending package worth US dollars 850 billion.

Overnight though, the S&P 500 futures market has traded limit down already, so good news is still not having a lasting effect at the moment. The Dollar index hit recent highs and traded at the psychologically important 100 level.

Should this move continue, the dollar is set to strengthen across the board. Orange County California is now in full Coronavirus lockdown with all gatherings of any size banned, and the Las Vegas strip is due to close for at least 30 days.

Should you have any trading requirements please contact:

Joshua Baxter

Magna Financial

1 Knightsbridge Green, London SW1X 7NE

DDI: 0203 371 9039

[email protected]