The law of unintended consequences
As the global equity markets crash the world is increasingly being brought to its knees. Companies who were just about getting by now faces imminent disaster as consumer behaviour changes quickly. Over here in the UK, I had to travel to London on Tuesday for a CNBC interview. The train station, Birmingham New Street, is usually full of commuters. It was notably down. The train itself had only one other person in my carriage. The commuters were spread out in the next carriage, leaving a distance between one another. Last night I was picking my son up from his regional tennis training outside a central collection point; a cinema in a retail park. The cinema looked empty, apart from the staff. The hit to the economy, temporary or otherwise, is obvious.
Weakness leads to looking for alliances
It is no coincidence that the UK and EU have agreed to 'dial down the rhetoric' over EU-UK trade negotiations. Diplomatic sources are claiming that both sides would like to lower the temperature. In times of distress, you need to multiply friends, not make enemies. So, one of the consequences of the virus is that it will throw the EU and UK together to try to arrange a deal. The longer the virus drags on the more likely the EU and UK will be to actually negotiate a deal. The scaling back of the rhetoric is the first step. It is hard to deal with one another when you are point-scoring.
However, still expect GBP sellers
The UK Chancellor Sunak is expected to deliver a 'painful' budget in November as previous tax-raising plans were avoided due to the coronavirus outbreak. So, expect more medium-term GBP sellers as uncertainty still remains for the UK. The fiscal stimulus measures by the UK Gov't barely registered on the GBPUSD before it continued its grind lower. Now I was wondering what the impact of the fiscal stimulus combined with the monetary policy 50bps reaction would be and I thought we would see more support for the GBP. I find this a worrying sign as central banks around the world look to Govt's for fiscal support.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
AUD/USD: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.