• Matthew Fotheringham

🌎 A wake-up call for the UK | COVID criminals | The underlying epidemic | 3 Things


April 10th, 2020


Happy Friday!


For many of us, we’ve completed week three of our lockdown and we are now able to make four-course meals out of canned goods and are anxiously counting down our toilet paper haul one square at a time.


Governments all over the world are handing out free money but in most cases in a limited capacity. Alternative lending is poised to fill in the gaps, here is what you need to remember when lending money to overseas.


Did you know?


Did you know the highest unemployment rate in the world is the property of Burkina Faso, with a 77% unemployment rate.


Can you name the top 5 countries with the highest unemployment rate?


Hint - we gave you number 1 (Answers below)

GBP


Boris is getting better, still in bed but had a big wake up call



Bojo’s illness shined a spotlight on the fact that the UK doesn't have a strict succession plan enshrined in law. His role is not head of state and is mostly convention rather than rule. Parliament would have to eventually choose a new PM, but that could take weeks, leaving the country headless.


Rishi Sunak (The Finance Minister), released a £750m plan this week to help charities weather the storm. Rishi beat out Michael Grove (Home Secretary) to be named “designated successor” to Dominic Raab (Foreign Secretary) who had a tough time of it this week trying to explain exactly how Mr. Johnson was able to run a country from a ventilator. Interestingly, it seems it is entirely possible to have no PM at all.


UK Monetary Policy - source: Focus-Economics/BoE

In two emergency meetings in March, the BoE cut the Bank Rate from 0.75% to a record low of 0.10%. This on top of record poor PMI beat down Sterling badly, briefly touching 1.15 before recovering this month. The PM’s health concerns added pressure on the pound but Sterling bounced back on the news that Boris was doing much better. Annual vol is still high and with corona cases mounting on an already maxed out healthcare system, the UK seems to be set to operate at these new lows.



USD EUR


COVID criminals



It’s a shame, but there will always be those who look to illegally take advantage of a situation. The current pandemic will make for no exception, as COVID-19 related crimes have been on the increase.


With virus protective equipment being seen as important as toilet roll was one month ago, it’s no surprise that cases of foul play are now emerging.


A Spanish “businessman” stole around 2,000,000 masks from a warehouse and sold all but 100 to neighboring Portugal before he was arrested. Meanwhile, the Spanish government was forced to import masks from China in an emergency purchase.


Andrew Cuomo, governor of New York, claimed that there are similar scenarios on the other side of the pond with medical centers and research facilities experiencing thefts of valuable protective equipment


Outside the world of masks and gloves, fake medicines are on the rise in developing countries. Last month, Operation Pangea, Interpol’s global pharmaceutical crime-fighting unit, made 121 arrests across 90 countries, resulting in seizures totaling $14m.


On brighter news, a much needed €500bn stimulus package was approved aimed at supporting small businesses through this time. Similar to the SBA loan program in the States, companies will be able to borrow up to 500k in government-guaranteed loans.


Pretty much every economic indicator, from business activity, sentiment, PMI, and inflation was worse than expected for the EU Zone. Unemployment is currently stable, but the next report will show the Covid19 fallout and with a number of member countries relying heavily on the service and tourism sector it is not going to be pretty. EUR vol is obviously up and we have seen an 8% swing in the last couple of weeks. The psychological level of 1.10 looks out of reach in the short term until the member countries get the virus under control.



USD CAD


An unemployment epidemic



Despite global stimulus packages in the trillions of dollars, there is a silent epidemic that is taking hold of nations. Unemployment has skyrocketed as the Coronavirus outbreak has caused businesses to shut down globally. Supply chains have been ravaged and consumers are spending money on Netflix subscriptions rather than small businesses.


The US has been leading the way, with the latest numbers showing 16.8m people applying for unemployment aid. There is an expectation that by the end of the quarter unemployment could be up to 15%. Two years of job losses from the last recession produced barely half the current total.


Canada has also been suffering as the federal statistics agency announced another 1m jobs were lost in March. This has brought their unemployment to 7.8%, with March being the largest loss of jobs in a single month since records began in 1976.


As quarterly unemployment numbers are released around the world, there is an expectation that we are going to see unprecedented numbers, with no countries able to shelter from the indiscriminate pandemic.


There are a few companies that are bucking the trend and are looking to bolster their workforces; Amazon, CVS, Walmart, Shoprite and InstaCart to name a few.


Nevertheless, furlough programs are being set up for the first time since World War II which will hopefully reverse these numbers somewhat. With the hope still being that we will be able to “flick the jobs back on” once it’s safe to go back out there.


The Loonie hit 1.45, a level not seen since 2016, before retreating back to 1.40. Still a multi-year low for CAD. The Bank of Canada will be meeting again on the 15th - it will be interesting to see if they make additional cuts after the two March cuts left the rate at 0.25%, which is now in line with most other OECD countries. Their problem is that - unlike many other countries - they still are battling inflation that is well above target.



In Other News



This Weeks Economic Data Calendar



Keep An Eye On Next Week



Feature Article


How to successfully lend overseas




Private lending to an overseas firm can be a daunting task, especially when confronted with the moving target that is the currency market. Some finance or investment teams may even scoff at the idea due to the perceived complexity of the transactions and thus may push their sales and management teams to favor domestic opportunities... READ MORE


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We educate and empower CFOs to take control of their FX risk and manage their cross-border transactions more effectively. Contact Us for a Transaction Cost AnalysisRisk Analysis or to explore Our Solutions.


Quiz of the week


  1. Burkina Faso - 77%

  2. Syria - 50%

  3. Senegal - 48%

  4. Haiti - 40.60%

  5. Kenya - 40%


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