Morning Commentary: Springtime Blues in the U.K.

Foreign Exchange - Morning Commentary
Springtime Blues in the U.K.
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David Atkinson
David Atkinson
Foreign Exchange Sales Manager
The spotlight of the global economy is shining on the U.K. this morning.  The U.K. is one of the few countries that publish GDP on a monthly basis instead of quarterly.  Presumably an argument can be made that too frequent of publications can scare a population when the larger picture isn’t so dire, but when we have piled on so much bad news already, what is one more number?

The U.K.’s GDP for April came in at a -20.4% decline, or plunge if we want to be accurate about it.  This comes after a -5.8% drop in March.  But like all economic statistics these days, we have become numb to the fact that the figures are bad.  It is just a question of how bad.  The FTSE 100 mirrored what we saw in U.S. equities, having fallen by 33% from its high to claw back about 20% of the loss.  The index is up just over 1% so far today in line with a positive opening to U.S. stocks. 

British pound sterling looks like a “V” on the charts.  We were trading at just over 1.31 USD per pound on March 9 and then just 10 days later hit a low around 1.15 before recovering to near the 1.25 level in just another 10 days.  Keep in mind that on top of a pandemic, economic carnage and civil unrest, the U.K. is also dealing with Brexit, which would be the main story for sterling if it were not for the other issues affecting the U.K along with everyone else.

Of course, these eye-popping numbers will have some corollaries the other way at some point.  Friday’s U.S. non-farm payrolls were a record increase, but as you can imagine, the context is one where everyone knows it comes after horrible drops in employment.  Everyone is now focused on how we move forward as confirmation of the last three months of economic shocks.

Data wise, we saw import prices rise 1.0% for May – that is a little above expectations, but excluding petroleum, that number came in at just 0.1%  Oil has been on a rebound after that crazy May contract price action, although West Texas Intermediate did drop 8.2% yesterday along with the stock market rout. 

Bloomberg Economics published an interesting statistic that 30% of current job losses are expected to be permanent.  We all know that most of the currently unemployed will return with economic activity, but what has been emphasized repeatedly is that the entire global economy will be restructured after this, and how that pans out will be interesting to see.
Have a great weekend everyone!
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