Following the launch of our series of free webinars examining the various impacts of Covid-19 on international business, we’ve answered the questions raised in our first session below.
Question: “If there is a further decline in stock markets, how will this impact GBPUSD?”
Answer: Under normal trading conditions, a decline in the value of GBPUSD can be reported as a positive development for companies in the FTSE100, who report most of their profit in Dollars. However, in this situation, given the overall sentiment and fear in the UK markets, you would expect to see the value of the Pound decline at a similar pace to the FTSE100. If UK businesses are struggling, it creates future risk on economic data like manufacturing and industrial production, employment numbers and GDP, all of which will contribute to a weaker Pound versus other currencies.
Question: “Due to business downturn, we have an excess amount of cash in USD as inventory went down. On a 6-month horizon base, which currency would you recommend keeping the cash funds in? USD, EUR, GBP, etc.? I’m looking for stability as opposed to making a profit from currency transactions.”
Answer: With many Central Banks slashing their interest rates, there aren’t many exciting options, but that said the Dollar is the reserve currency for the economy. A recovery led by the US markets would drive sentiment in other markets and would most likely drive a stronger Dollar overall. I assume many other businesses will also be holding a surplus of Dollars. 
Question: “How would you comment last two weeks increase of LIBOR USD (it doubled)? What is your view of LIBOR 3M USD at 31.12.2021 a year from now?”
Answer: This is an interesting question. The aggressive rate cut undertaken by the Fed spread out the Libor rate by 120+ points. The market was simply not prepared to see a cut to 0.00% and within such a short space of time. The Federal Reserve had maintained a neutral stance heading into 2020, suggesting neither a hike or cut was on the cards, all being well. EuroDollar implied rates suggest the Fed need to hike rates by 25 basis points. 
Question: “Can the resurgence of the Chinese economy help save the world economy from a recession?”
Answer: Absolutely, the Chinese economy is the 2nd largest globally and is really the driving force behind manufacturing and industrial trends. Volkswagen has already reported that 22 of their 24 car plants are back open and operating normally. This is a great sign that things are tentatively returning to normality. It would be un-wise assume other economies will follow suit as quickly, but as China dealt with Covid-19 ahead of other countries, it provides a loose framework on timings. 
Question: “How do you see the euro performing short term?”
Answer: The Eurozone has been worst hit by the Covid-19 pandemic with several key economies facing extended periods of economic lockdown. The ECB will do what they can, but based on the 2019 economic performance and the repeated recession avoidances, the economic outlook for the Euro as a whole is fairly poor.
Read part 2 of our Q&A here. Missed the webinar? No problem! Catch up here.
All answers are provided by our in-house FX expert and webinar host, Alistair Hutson. Whilst every effort is made to ensure the information published here is accurate, you should confirm the latest exchange rates with WorldFirst prior to making a decision. The information published is general in nature only and does not consider your personal objectives, financial situation or particular needs. Full disclaimer available online.