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May 13, 2020 | Risk Management

Currency Market Update - Lockdown Eased

Customers have been asking us about the government’s lockdown exit strategy and how this might impact the currency market.

By George Vessey, Currency Analyst 

The recent reliance of information revolving around the current market has been key for businesses during these current times. The impacts that industries could potentially face due to the upcoming events remains at the forefront for many businesses. That is why, with the help of Western Union Business Solutions’ Currency Strategist, George Vessey, you can gain a further insight and understanding of the current market as we move forward.

“Many customers have been asking us about the government’s lockdown exit strategy. What impact the phased reopening of the economy could have on a macro and micro scale and of course, how currency markets might react? Because at the end of the day, businesses still need to plan ahead, manage cash flows and make important currency related decisions.

“We are seeing governments around the world struggling with the question of how to restart their economies while still containing the coronavirus. And the UK government recently announced a conditional plan to reopen parts of the UK economy. We could potentially see some of the hospitality industry reopen come July too, depending on social distancing being maintained and avoiding new infections rising at an exponential rate.

  • Now, a successful exit from lockdown that maximises economic recovery in a so-called v-shape fashion would be the best-case scenario – and likely help the pound strengthen too.
  • However, if there is a resurgence in new infections and the UK resorts to tighter lockdown measures again - halting economic activity and opening the door to a U or W shaped recovery or even an L shaped recovery, which is the worst-case scenario – otherwise known as a depression, which lasts for several years.

“After digesting the government’s lockdown review, the pound has weakened modestly. It remains nearly 7% lower against the dollar year-to-date, having tumbled to 35-year lows back in March during the height of the market turmoil.

“Looking forward - the months ahead are expected to be quite volatile and certainly dynamic and there are even Brexit trade negotiations to consider, adding another element of uncertainty to what is already a complex environment. This makes planning forward even harder for companies that depend on clear longer-term trends and currency stability to manage cash flow and finances.”

With currency volatility and the current environment being so uncertain, it is important for businesses to stay up to date on the latest market trends and events. That is why Western Union Business Solution and its Currency Strategists like George Vessey are committed to delivering ‘Daily Market Updates’ to help support businesses by providing market insight to help you navigate today's currency markets.

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