Last Week’s FX and Economy Summary Apr 13, 2020

Glimmers of hope in Europe

Coronavirus fears have continued to dominate markets. The number of cases in Europe has continued to increase, but the rate of growth has slowed in Italy and Spain. The number of new deaths in Spain has also fallen significantly to the lowest level for over two weeks, increasing optimism that the lockdown measures have had an impact.

Australia announced a slight easing of restrictions would come into force on April 13th.

The number of US cases continued to increase sharply to over 500,000 while the number of deaths increased to over 20,000.

Restrictions were lifted in the Chinese city of Wuhan for the first time since January.

Federal Reserve provides additional support

The extraordinary support from the US central bank continued during the week. The US central bank announced a further $2.3trn package. The central banks, backed by the Treasury, will provide discounted loans to small and medium-sized companies.

Fed Chair Powell warned that the economy faced a sharp downturn in the short term, but he was optimistic that the rebound when it came could be robust. 

Equity markets make strong gains

Global equity markets made strong gains during the week as aggressive support package by central banks helped support confidence. US equity markets posted the strongest weekly advance since 1974.

The stronger tone in risk appetite was also an important factor boosting confidence in commodity currencies. The Australian, New Zealand and Canadian dollars strengthened during the week. 

In contrast, there was a dip in defensive demand for the US dollar, especially with unease over medium-term currency trends.


There was another huge increase in jobless claims for the week with claims increasing 6.6mn after an upwardly-revised 6.9mn increase the previous week.

Consumer prices declined 0.4% for March as energy prices declined sharply with the year-on-year rate declining sharply to 1.5% from 2.3%. There was an underlying decline of 0.1% for the month with an annual rate of 2.1%.

Consumer confidence declined sharply for April according to the latest data.


Political developments remained important with Prime Minister Boris Johnson admitted to hospital and then going into intensive care as his condition deteriorated. 

Sterling lost ground amid concerns that the government’s effectiveness would be undermined. His condition did improve late in the week which provided some currency relief.

GDP data was reported as declining slightly for February, reinforcing concerns that the economy was performing poorly ahead of the coronavirus outbreak. 

Sterling did, however, secure important support from an improvement in global risk appetite.


The Euro-zone government initially failed to agree a support package with further disagreement over the issuance of shared bonds also called coronabonds. 

There was eventual agreement on an immediate EUR540bn support deal as the fudged rhetoric satisfied the Italian government even though there was immediate support for coronabonds. 


The Reserve Bank of Australia held interest rates at 0.25% following the latest meeting with the government bond-buying programme continuing.

Canada released its latest jobs data with employment declining by over 1.0mn for March compared with market expectations of around 430,000 while unemployment surged to 7.8% from 5.6% previously.

The meeting of OPEC and non-OPEC members resulted in a deal to cut production by 10mn barrel per day (bpd) for May and June with a slightly smaller 8mn bpd cut for the remainder of 2020. Oil prices had moved sharply higher, but then retreated equally sharply with expectations that there would still be a huge short-term over-supply in the market.

Tim Clayton

Tim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics.

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