Update -

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

25th September 2020

Category

Macro Commentary

The UK government announced a further economic support package yesterday, having introduced additional lockdown measures earlier this week, in its latest response to the virus pandemic. This will of course further drag on the economic recovery and add hugely to government debt levels.

Global stock markets have also been hit hard as the future profitability of many companies remains at risk.

The Bank of England this week said they have looked hard at cutting rates, and that negative rates remain an option. The governor insisted the Bank stands ready to take further action and will do everything they can to support the economy. He also said they would be flexible in returning inflation back to target, meaning rates are likely to stay lower for longer.

In the US, the 3-month libor benchmark rate fell to its lowest level on record, as the central bank continues to flood the market with liquidity. Fed officials continue to stress the need for further fiscal stimulus to help the ailing economy.

On the economic front, European data was a little weaker than expected, whilst UK data remains very mixed, and the recovery unbalanced, with housing doing particularly well.

On the exchanges, the US dollar has had its biggest gain in three months on a general move to safe haven assets.

GBP/USD failed to regain a handle above 1.3000 and has dropped to a 2-month low near 1.2700. The next major downside target is 1.2500.

GBP/EUR has found a short-term base at the recent low of 1.0800 but remains below the psychological 1.1000 level.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

29/9/20

UK Mortgage Approvals

66.3k

 n/a

30/9/20

UK GDP YoY

-21.7%

 -21.7%

30/9/20

UK Current Account Balance

-21.1b

 n/a

1/10/20

UK Markit Manufacturing PMI SA

54.3

54.3

1/10/20

EU Unemployment Rate

7.9%

8.1%

2/10/20

US Change in Nonfarm Payrolls

1371k

865k

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.1675

AUD/USD

0.7080

GBP/USD

1.2795

USD/AED

3.6730

GBP/EUR

1.0960

GBP/AED

4.7000

USD/CHF

0.9260

EUR/AED

4.2880

USD/JPY

105.30

XAU/USD

1871

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

5824

-22.78%

S&P

3246

+0.49%

EUROSTOXX

3158

-15.65%

DFM GENERAL INDEX

2252

-18.52%

UK Benchmark Rates

Libor

 

Swap Mid

 

3 month

0.06475%

2 year

0.08%

6 month

0.09475%

3 year

0.12%

12 month

0.16188%

5 year

0.19%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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Weekly

Treasury Market Commentary

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