Marknadsövervakning - 14th May 2020

Although the UK GDP and industrial production data releases yesterday were bad, they were not as bad as expected. Indeed, sterling managed to initially strengthen a touch against US dollars and euros. Ultimately though, with GDP falling the fastest in history, sterling weakened across the board. Chancellor Sunak warned that the economy was facing a "significant recession." An internal treasury document suggested that the furlough scheme would cost £80 billion, and if the economy's course took that of an L shape, the UK would be overdrawn by some £1.19 trillion.

As Germany announced that it would start to open its borders, Chancellor Merkel gave the euro some support by saying it was a currency with global importance, and it should have more global weight and importance. Italy announced a euro 55 billion stimulus plan, although they still have a near 160% debt to GDP ratio. Eurozone industrial production fell by 11.3% and 10.4% across the European Union.

US PPI fell 1.3% in April, lower than the 0.5% expected. Although the main event was a webinar given by Fed Chair Powell. He started by saying that 40% of workers whose remuneration was below USD 40K had lost their jobs since the pandemic. He continued that additional policy measures may be needed to avoid lasting damage as well as ruling out negative interest rates.
The main talking point was the Reserve Bank of New Zealand and their very accommodative QE action, which was accompanied by a suggestion that negative interest rates could be utilised if needed in the future. Overnight, the Australian jobs data showed an additional 594k workers lost their jobs last month, and this saw AUD weaken.

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