Tragic Manchester Attack Overshadows Markets

Miltiadis Skemperis

Currency Solutions

The Pound has fallen today on the sad news of an attack in Manchester which killed 22 people and injured 59. It wasn’t helped by the ONS report showing the UK budget deficit widened by more than expected. The Pound is likely to remain weak due to political concerns ahead of the 8 June General election.

The US Dollar is stronger against the Pound, today, but it still isn’t a match for the rising Euro. The single market currency is strong, in spite of the news that Greece failed to reach an agreement with its creditors, because the overall EU economy continues expanding at a good pace.

Pound Sterling – UK Markets

On one of the worst Tuesday mornings of the last 12 years for Britain, Sterling lost ground against both of its main competitors. Sterling to Euro exchange rate was set at €1.15, while the Pound to US Dollar rate was set at $1.29.

Financial news has been overshadowed by the saddening updates coming from Manchester. On Monday night, a suicide bomber carried out a terror attack at the Manchester Arena, as Ariana Grande’s music concert drew to a close. Twenty-two people, including many children, were killed and fifty-nine are treated in hospitals of the city. All political parties suspended their election campaigns until further notice. Prime minister Theresa May will chair a meeting of the government’s emergency Cobra committee to assess the situation. The attack in Manchester came exactly two months after the attack at Westminster.

New figures announced from the Office for National Statistics (ONS) showed that the UK budget deficit jumped to £10.4bn in April. This is worse than the most pessimistic City forecasts, indicating a bad start to Britain’s financial year.

US Dollar – US Markets

The US Dollar took advantage of the British Pound’s weak performance and managed to regain some of Monday’s losses. The exchange rate between the US Dollar and the British currency was set at £0.77. On the contrary, the US Dollar kept on losing value against the Euro. The exchange rate between them was set at €0.88.

Donald Trump’s first part of his trip to Asia and Europe has been a success. The president signed a multi-billion US Dollar weapons deal with King Salman in Saudi Arabia. His next stop was in Tel Aviv and Jerusalem, where he met with the Israeli prime minister, Benjamin Netanyahu, and the president of the Palestinian Authority, Mahmud Abbas to discuss the restart of negotiations, which have been frozen since 2014.

Back in the US, analysts point out that a storm is brewing in the automotive sector. Worrying signs are flattening sales, high inventories and falling used car prices. One of the victims of the ill-performing car market seems to be Mark Fields, Ford’s ex-CEO. On Monday, Ford announced that Fields is entering retirement with immediate effect and will be replaced by James Hackett. Ford’s investors requested the change in leadership over the drop in market value and falling profit.

Euro – European Markets

The Euro strengthened against the US Dollar with the rate set at $1.12. The rate has been moving upwards since yesterday’s comments by Angela Merkel, that the single market currency is “too weak”.

In Monday’s Eurogroup meeting, Greece and its creditors failed to reach an agreement, even though Athens has introduced yet more austerity measures. The next instalment of Greece’s bailout loans wasn’t unlocked. Greece faces large loan repayments in July. Eurogroup president, Jeroen Djisselbloem, said that despite Greece’s huge progress, it still hasn’t taken enough actions to qualify for its next aid tranche. The next Eurogroup meeting is scheduled for June 15.

According to the latest survey from data firm Markit, French companies are growing at their fastest pace in six years. Economists suggest that there is strong growth momentum in the French private sector. They believe that the acceleration is driven by the dominant service sector combined with the sharpest round of job creation since August 2011.

Other Currencies – Highlights

The Australian Dollar continued its rally against the British Pound, setting the exchange rate at 1.73 AUD. Market analysts suggest that there is an interesting contrast in the Australian economic data between the strength of business sentiment and the weakness of consumer confidence. They believe that in the next few months, good business conditions, combined with a better performing labour market will lead to stabilisation followed by recovery in consumer sentiment.

Sterling lost 0.7% of its value against the New Zealand Dollar, with the exchange rate between them set at 1.84 NZD. The Kiwi kept up Monday’s momentum on expectations that the government’s budget announcement will paint an upbeat picture of the domestic economy. Global dairy trade numbers, which are continuously improving over the past few months, are supporting the recovery and growth of New Zealand’s economy.

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