Sterling takes a pounding this week, another victim of the extreme risk aversion sentiment set off by the rising probability of a global economic collapse if the world goes into lockdown to combat the coronavirus spread.
United Kingdom Headlines and Economic data
Monday:
- No major U.K. headlines or data on the session, so the likely driver was the big risk aversion day as traders priced in the growing probability of a big hit to the global economy by the coronavirus pandemic; now realized after U.S. President Donald Trump said the U.S. economy “may be” headed for recession and the surprise weekend stimulative actions announced by the Bank of Japan, the Federal Reserve and the Reserve Bank of New Zealand.
- As usual, Sterling was mixed from the risk aversion environment, starting the week up against the comdolls while lower against the safe havens.
Tuesday:
- UK jobs boom gathers pace but unemployment rises too: ONS
- £330bn of business loans made available as PM says school closures ‘under continuous review’
Wednesday:
- No catalysts from the U.K. to tie to Sterling’s drop on the session, but it was a nother big risk aversion day in the financial markets, which actually saw a break in the usual risk behavior relationships as even bonds and gold fell. This is likely due to the rising concerns of bank liquidity, an extreme demand for U.S. dollars, and the rising probability of a deep global recession.
Thursday:
- EU’s Brexit negotiator Michel Barnier says he has tested positive for the coronavirus
- Johnson plans London lockdown as crisis escalates
- PM Boris Johnson says England to shut schools due to coronavirus pandemic
- The Monetary Policy Committee at a special meeting on 19 March voted to cut Bank rate to 0.1% and increase its holdings of UK government and corporate bonds by £200 billion.
- Risk sentiment swung positive on the Thursday trading session, likely a reaction to the continued stream of stimulus actions by global central banks, including a €750bn bond-buying program from the ECB, interest rate cuts and QE from the RBA, and the announcement of a third coronavirus aid package this week from U.S. lawmakers. As expected, the British pound falls against the comdolls, while charging higher against the safe haven currencies.
Friday:
- Public sector net borrowing in February 2020 was £0.3 billion, £0.3 billion less than in February 2019
- The United Kingdom is closed: Johnson shutters pubs and restaurants
- UK steps in to pay workers’ wages amid coronavirus shutdown
- In case you missed it, here is a cheat sheet on Who Has Done What for Their Economies Since the Coronavirus Pandemic Hit
