Marknadsövervakning - 20th May 2020

The pound stayed supported on dollar weakness as the market waited for Fed Chair Powell and US Treasury Secretary, Mnuchin, to talk. The Department for International Trade announced that the UK would abolish all tariffs on GBP 30 billion of goods arriving from abroad. Although of course if no trade agreement is agreed with the EU, imports from there will increase. The pound has stayed supported with UK CPI being released as increasing by 0.8% rather than the 0.9% expected. BoE Governor Bailey speaks at 14:30 this afternoon and will cover its behaviour regarding its recent and future actions to combat the economic impact of Covid-19.

The market bought EUR/USD on positive sentiment after the proposed eurozone reconstruction plan was announced. However, French Finance Minister, Le Maire, said the scheme would not be ready until next year and as yet the 27-member nations haven’t agreed to it. There are now reports that some of the smaller states such as Poland are objecting to the plan and this has encouraged EUR/USD to give back some of its gains. This has been despite German ZEW economic sentiment was a pleasing 51.0 after last month’s reading of 30.0.

Fed Chair Powell and Treasury Secretary Mnuchin testified together and managed to calm the equity markets, which had been weaker in earlier trading. Fed Chair Powell continued on his recent themes by saying the time was soon coming when people would question whether the government response is enough. President Trump sent a very combative letter to the World Health Organisation accusing it of favouritism towards China and against the US. This evening FOMC meeting minutes are released.

In spite of China maintaining that its actions over Barley were in line with WTO rules, the AUD pushed higher as the US dollar weakened.

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