Dollar on the front foot
The dollar remains on the front foot, strengthening to around $1.10 against the euro and to under $1.21 against sterling, leaving the pound trading at over 91p against the single currency. Equity markets recovered some ground yesterday after a very sharp decline on Monday, and core bond yields rose (US 10-year yields are back to 1%) after falling at the start of the week following the Fed’s rate cut on Sunday, while oil prices have weakened further with Brent crude now below $30 per barrel
Governments continue to propose/announce fiscal packages to mitigate the economic impact of Covid-19. The Trump administration is planning a package of measures amounting to some 1 trillion dollars – or some 5% of GDP – which would include direct cash payments to households
The UK government has announced loan guarantees for businesses of some £300bn – the equivalent of 15% of GDP – as well as other measures, including a 3-month mortgage repayment holiday, while the Spanish government has also announced loan guarantees, joining Germany and France who have both adopted this particular policy measure in recent days
New BOE Governor Andrew Bailey says economic activity in the UK is likely to “weaken materially” in the coming months but the “shock” from Covid19 should be “temporary”
ECB’s De Guindos says the central bank is ready to use all its policy tools again if appropriate and would also like to see a single, unified EU response to the coronavirus crisis
Data due today include a final reading of Euro Area CPI inflation in February and housing starts and building permits in the US