Kiwi buoyed by continued recovery in oil prices and softness across key data sets

Key Movers

The US dollar index continued its week long advance, driven higher by broad based euro weakness. A slew of poor manufacturing and services PMI reports highlighted the scale and breadth of the economic impact fostered by the coronavirus lockdown, while EU leaders failed to agree terms surrounding an appropriate rescue package urgently required to prop up the embattled common market. Germany, Austria and the Netherlands countered calls from southern members and France demanded more detail as to how the 2 trillion Euro recovery fund would be issued, preferring a loans-based system as opposed to the grant structure proposed. The uncertainty surrounding the rescue package weighed on the combined unit forcing a break below 1.08 as the euro touched 1.0755. Sterling rallied through trade on Thursday despite weakness across domestic manufacturing and services data. Investors were prepared for softness and largely ignored the dire read that printed well below even conservative approximations. PMI fell to a record low of 12.9, down from 36 in March and well-off estimates at 31.4. The scale of collapse, while ignored for now serves to highlight the headwinds that lie ahead for the British economy. UK businesses are in turmoil as they try and combat the effects of the lockdown while preparing for what will likely be a hard exit from the European common market come the end of the year. A large swathe of companies are simply running at zero output and stimulus packages don’t appear to be filtering through quick enough to save some small and medium size entities with estimates 500,000 businesses will be lost before the crisis ends. Britain continues to struggle to contain the pandemic and as such, lockdown measures are expected to be in place in some form or another through the foreseeable future adding mounting pressure to the GBP as we look beyond the short term and toward 2021.