The number of cases of the COVID-19 virus continues to increase at an alarming rate around the globe, particularly so in the US, which is now close to overtaking Italy as the worst affected country in the world, outside China. Over 13,000 new cases of the virus were reported in the States yesterday alone, taking the total number to almost 70,000. It now appears a matter of time before the country overtakes China as the most rampant hotspot for the pandemic. This worrisome acceleration in the virus, combined with President Trump’s apparent laxed response to its severity, has undoubtedly contributed to at least some of the weakness in the dollar in the past couple of days.

An economic data release that usually goes completely under the radar will take centre stage today. US initial jobless claims, the most timely measure of health in the US labour market, are expected to show a massive increase of historic proportions when released this afternoon. The indicator, which represents the number of new Americans filing for unemployment benefits in a one week period, is projected to come in around the 1 million mark for the week to 20/03 according to a Reuters poll. Not only would this be a near four-fold increase on the week prior, but it would by far and away eclipse the 665k peak hit during the financial crisis.

We think that a confirmation of the above could trigger a fresh bout of weakness in the dollar when the data is released at 12:30 GMT today.

Will the BoE announce any new easing measures today?

The new Bank of England governor Andrew Bailey will take charge of his first ever scheduled MPC meeting today.

After last week’s interest rate cut and following the emergency liquidity measures announced earlier in the week, it is unclear whether any new measures will be announced today intended to support the UK economy. We will, however, receive the latest meeting minutes, which will likely state that the bank stands ready to act further, should conditions in financial markets or the UK economy warrant more stimulus.

While the pound has rallied against the dollar this week it has found gains harder to come by against its other major peers on concerns that the NHS may be ill-prepared to deal with the incoming flurry of COVID-19 cases in Britain. The number of cases are set to pass 10,000 in the UK today, with the death toll now over double that in Germany. As the UK enters into the sharp growth phase of the virus sterling could prove fragile, particularly should the market deem Boris Johnson’s containment measures as insufficient to material halt the virus’ spread.

Euro rises despite no signs of virus slowdown in Europe

The euro rallied for the fourth day in a row versus the dollar this morning. This is, however, entirely due to a retracement in the greenback, in our view. Cases of the virus continue to accelerate in mainland Europe, with no signs yet that it has peaked in any of the major countries in the bloc. Shortages of medical supplies and equipment are becoming a real issue, and it seems that the situation is likely to get worse before it gets better.

Given the severity of the spread of the virus in Europe, we think that the Euro Area economy will be just about the worst affected of all the majors in the coming months. Aside from this week’s disastrous PMI data, there have been no real timely data releases that show the true extent of the downturn. Next Monday’s consumer and business confidence data for March could, however, be very telling.