Global Economy Predicted to Shrink but US Dollar Makes Gains

As Wednesday came to an end, the Foreign Exchange market indicated that the pound lost some of its gains and the currency has started today in much the same way. It ended at 1.1487 against the Euro and 1.2522 against the Dollar, much of which has been driven by any optimism around the coronavirus disappearing. However, it is also likely that the International Monetary Fund has contributed to this as it predicted that the global economy was likely to shrink by 3% during this year.

In contrast, the Euro had a bumpy ride against the pound although it did finish broadly stronger as the single currency was bolstered by improvements in the Coronavirus outlook in the Eurozone. This comes after it nearly hit a month low earlier during the week. However, there was a small drop in German inflation today and there are expectations that the European industrial production is likely to decline further and that is likely to have an impact on international payments and the strength of the market as a whole.

The dollar took a step forward yesterday as safe-haven currencies are back in favour again. Market sentiment dropped in reaction to the news that the global economy is more than likely going to shrink this year.

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