News & analysis


Sterling traded higher against the US dollar yesterday along with many of the G10 currencies, as Boris Johnson returned to work and signalled that the UK would be taking a cautious approach to re-opening the economy. Further clarity on the exact plan for re-opening remains in short supply, although the UK infection and death numbers continue to suggest the local pandemic was stabilising. Rishi Sunak unveiled expanded access to loan guarantees for small businesses, which will now be able to access up to £50,000 in credit that is fully underwritten by the Government. The loans will also be interest-free for the first year – which seems like less of a giveaway when the fact that the Bank of England Bank Rate is 0.1%. The decision came after several weeks of pressure from business and MPs to improve access to Government backed financing. Sunak yesterday rejected calls for the Government to expand access even further by making the coronavirus business interruption scheme, a larger facility that lends up to £5m, similarly fully guaranteed. Sunak also told MPs that the Government’s job support scheme would only be “gradually” wound down. The Confederation of British Industry will release the results of its retail sales survey today at 11:00 BST.


A turnaround in the dollar gave EURUSD some support this morning while pressures from broader risk sentiment remain in play. Markets are likely to focus on the details of eurozone exit strategies as France, Italy and Spain prepare to ease restrictions while several other eurozone countries have already announced a tentative easing of containment measures. Thursday’s European Central Bank meeting remains in focus for the euro, after European leaders endorsed the Eurogroup’s recommendations for 540bn in financing to respond to the immediate economic crisis at hand, but failed to agree a broader recovery package. French Consumer Confidence rose to 95 upon release this morning, compared to the consensus of 80 and prior reading of 103.  While the reading did surprise to the upside, it still is the largest monthly drop in French Consumer Confidence since the survey was first released in 1972. France’s Labour Ministry stated on Monday that the unemployment number rose by the most in records as short-term contracts are not being renewed and job application processes slowed down amid the crisis, despite the state’s effort in subsidised furloughs created to avoid permanent dismissal.


The dollar was caught on the back foot yesterday as developments in the APAC area sparked a mild risk-on mood in markets. Exit strategies in parts of Australia and increasing monetary stimulus measures from the Bank of Japan shaved off some of the fear regarding global growth, helping the more risk-sensitive G10 currencies make large moves from the dollar in what was a light data session. The dollar has bounced back today, however, as another slide in oil benchmarks this morning weighs on global risk sentiment. This afternoon, the market receives retail inventories data for March at 13:30 BST, along with consumer confidence data at 15:00 BST. The data calendar doesn’t really kick start for G10 markets until tomorrow, however, with Q1 GDP readings and the latest FOMC decision released. Expect the dollar to continue trading off of risk sentiment today.


The loonie floated in blissful ignorance to developments in oil markets yesterday and joined the G10 rally against the dollar. As June delivery WTI futures contracts fell $4 to close just below $13 a barrel, the loonie continued to trade in the green against a generally softening greenback, although arguably developments in oil markets capped the loonie’s rally at just 0.47%. Today, however, the slide in oil markets for the second consecutive day is having a greater impact, not only on the Canadian dollar but risk sentiment in markets altogether. Reports that clients are struggling to add positions in certain contracts as the supply glut continues is weighing on benchmark indices, with Brent back below $20 too. The freefall in WTI and Brent this morning, -$2.45 and -$0.98 respectively, is weighing on US stock futures, European equity markets and dampening risk appetite in FX markets also. Global risk sentiment is likely to remain the primary driver for the Canadian dollar in lieu of any economic data today.

FX Elsewhere

The Swiss franc was the only G10 currency to sit in the red against the dollar in yesterday’s session. Data published by the Swiss National Bank showed sight deposits rise by 13.4bn francs ($14bn) to a record of 651bn francs in the week ending April 24th, suggesting currency intervention by the nation’s central bank. The rise in sight deposits was the largest since January 2015, when the Swiss franc was de-pegged from the euro. Domestic sight deposits are the markets best proxy for central bank intervention in FX markets as it only publishes intervention data on an annual basis. Sight deposits increase when the SNB purchases EUR and USD from banks directly, in effect increasing the amount of CHF in the system which is then parked at the central bank in the form of reserves in the interim. The Swiss franc continues to trade heavy this morning as markets are more than aware that the central bank will directly intervene should the currency surge back towards last week’s highs.

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