Macro Commentary

The US central bank met this week, and kept policy on hold as widely expected. Officials voted to hold their benchmark rate in the range 0% to 0.25%.  The committee were, once again, rather downbeat on the outlook for the economy, with the lack of addressing any forward guidance, these lower rates look set for the foreseeable future.

The next round of US government support for the economic recovery is under negotiation, with an announcement expected in the next few weeks.

The dollar has weakened across the board as the US continues to struggle with the virus, ongoing tensions between the US and China and now Trump suggesting a possible delay in November elections.

The Euro continues to benefit from the general view that the EU authorities have handled the crisis better than the US, and will likely recover quicker, helped enormously by the recent agreement on the EUR 750bn recovery fund.

On the exchanges, it remains a theme of dollar weakness.

GBP/USD rallied and broke the 1.3100 barrier, the highest it has been since early March. We have seen an increase in clients buying dollars recently. On the downside, the pivotal 1.2550 level remains the initial support, now trading above 1.31.

GBP/EUR has seen demand ahead of last month’s low of 1.0900, whilst 1.1250 continues to cap the topside, now trading back above 1.10.

EUR/USD meanwhile, hit its highest level since 2018, breaking through the 1.1800 level.

GBP/USD – 1-year chart

Week ahead

3/8/20 UK Markit PMI Manufacturing SA 53.6  53.6
5/8/20 UK Markit/CIPS Services PMI 56.6 56.6
5/8/20 UK Markit/CIPS Composite PMI 57.1 51.7
6/8/20 UK Bank of England Bank Rate 0.10% 0.10%
7/8/20 US Nonfarm Payrolls 4800k 2000k

*Bloomberg survey / Not available

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 5980 -20.63%
S&P 3245 +0.48%
EUROSTOXX 3200 -14.17%
DFM GENERAL INDEX 2050 -33.95%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1890 AUD/USD 0.7210
GBP/USD 1.3140


USD/AED 3.6730
GBP/EUR 1.1050 GBP/AED 4.8290
USD/CHF 0.9070


EUR/AED 4.37
USD/JPY 104.35 XAU/USD 1971

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.08213% 2 year 0.11%
6 month 0.16175% 3 year 0.13%
12 month 0.31138% 5 year 0.16%


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