Fed Chair Jerome Powell warned over such a possibility during the central bank’s meeting on Wednesday, stating that another wave of infection could harm the US recovery and lead to an increase in joblessness. Should this uptick in new cases continue as a result of the mass gatherings in the coming days, then this trend of a strengthening dollar and deprecation in risk assets could remain the key theme in markets for a little while yet.

UK economy contracts by most on record in April

A notable exception to the risk-off trading was the euro, which managed to mostly hold its own throughout much of trading yesterday. While an exact rationale for this resilience is hard to pinpoint, the still easing number of virus cases and re-opening of economies in the bloc is likely providing comfort for investors. There’s not been too much in the way of European macroeconomic data for currency traders to digest so far this week. This morning’s industrial production numbers may, however, receive some attention.

Sterling, meanwhile, did fall sharply, declining back below the 1.26 mark for the first time in over a week. Ongoing concerns surrounding Brexit were likely partly to blame for this underperformance. Data out of the UK economy this morning was also pretty dire, with GDP contracting by a record 20.4% month-on-month in April – slightly worse-than-expected. Virtually every component of the UK economy was hit hard due to the lockdown, particularly hospitality, education and car sales. There is, however, some crumb of comfort that this is likely the worst of the downturn, with activity set to have picked up in May as restrictions were gradually lifted.