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Market Update

• Posted by currencies in coronavirus, Currency, Dollar, EUR, GBP, Prime Minister, Sterling, UK, Uncategorised
• April 7, 2020
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Sterling rallied with a broad rebound in risk markets encouraging some selling of the dollar, while traders awaited news on British Prime Minister Boris Johnson, who is fighting worsening coronavirus symptoms in intensive care.

Johnson, 55, was moved into an intensive care unit in a London hospital late on Monday after his condition had deteriorated rapidly over the preceding 24 hours. His foreign minister is deputizing for him to lead the government’s response to the outbreak.

Analysts said that while news of Johnson’s condition was clearly a concern, beyond a short-lived dip in Asian hours it had not yet moved the pound because it was unlikely to mean a change in the government’s policy direction to fight the virus.

Certainly, losing the head of government is not going to inject ‘confidence’ into the FX market, but government policy in a non-presidential system is ultimately crafted by the PM and his/her close advisers.

It’s also far too early to know what the PM being incapacitated or not making it out of the hospital will mean for UK economic and Brexit policy 3 to 6 months out. When there are too many moving parts, as we saw with the entire Brexit process, sometimes the British pound just simply does nothing.

Rabobank analysts said Johnson’s condition was a reminder of the risks governments face in designing an exit strategy from the lockdowns, because it is not just elderly people with underlying health conditions that suffer.