Snapshot – 26th March

26th March 2020

European equities have made only small gains in today’s session but the S&P 500 is up 4.6% at time of writing – the first time since 10-12 February that the US index has posted three consecutive days of gains.

The recovery in equities and global risk appetite has been spurred by the US Senate’s approval last night of a $2trn emergency fiscal package which the House of Representatives will now vote on Friday before the bill goes to President Trump for signing. Notably the release this morning of horrific US initial jobs claims data has seemingly done little to dampen the mood. The number of people who filed for unemployment insurance for the first time in the week to 26th March surged to 3.3 million. To put this in context during the great financial crisis in 2008-2009 the high was “only” 666,000.

The other stand-out “trend” has been the reversal in the Dollar in the past three sessions. In trade-weighted terms it has now fallen about 3.5% from its peak on Monday. Whether recent measures taken by the Federal Reserve (and other major central banks) to address Dollar-liquidity and supply issues prove sufficient and see the Dollar continue to weaken, particularly into year end, remains an open question.

Sterling has slightly outperformed in the context of a weaker Dollar. The GBP/USD cross, which was extremely volatile yesterday, has leapt to 1.215 but perhaps more tellingly GBP/EUR is at the top of a 1.05-1.105 range in place since mid-March. The Bank of England, which has cut its policy rate by a cumulative 65bp in the past fortnight, left rates unchanged at 0.1% at its scheduled policy meeting today and made no new material announcements, in line with expectations.