Yesterday saw market focus drift from the predictably uneventful outcome of the EU crisis meeting, as the north/south divide between the EU member states contributed to the lack of progress made towards financing the 1.5tn euro loan/grant package suggested to assist coronavirus plagued economies. For now, in the midterm at least, the market appears to be refocusing on each countries lockdown exit strategy, as some, such as New Zealand, announced they are to phase out their lockdown procedures and re-open business at the end of the week. Naturally, the knock-on effect was a positive one for the Kiwi dollar, as market makers start to flock to the economy it believes will get back to business first.
Unfortunately for the UK, and pound by extension, the end date for lockdown still remains elusive. Dominic Raab was coy on revealing his thoughts on the deadline to end lockdown in yesterday’s daily coronavirus update; obviously, there is a balancing act between the health of the UK’s citizens and the health of its economy, but so far, not enough is being done in the market’s eyes to show the UK is ready to re-open. Take for instance the matter of testing: the UK lags far behind its peers with regards to tests per thousand citizens, with the Government finally saying yesterday that it was looking to extend testing beyond only NHS staff and their families.
In short, if satisfactory progress isn’t made towards releasing the economy from lockdown, the pound is likely to lose ground against currencies with lockdowns coming to an end. Although this may seem unfair, the fact of the matter is some countries are dealing with coronavirus better than others – unless the UK can up its game, it risks being pushed to the back of the recovery currency queue.
Have a great weekend,
Author: Joshua Haden-Jones, Senior Relationship Manager
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