Sectors Impacted More Than Expected
February 18, 2020 — 3 min read
The Pound movements are likely to be very muted this morning until some key data is released at 09:30am GMT, being jobs and earnings data. Generally speaking a view of inflation can be measured (somewhat) by looking at these data sets and some inference can be made around growth as well. These figures are forecast as being mixed but without too many surprises – no change is predicted with the unemployment rate but a slight reduction is expected in average earnings and increase in claimant count in there as well. Should these play out in this way, there shouldn’t be too much movement as a result but, as always, it’s an unpredicted figure that sets the markets alight…
With the coronavirus still affecting the health of thousands globally, there already has been much made of the economic slowdown attributable to the disease. Looking at some of the economic impacts, beyond the billions set aside to help combat the infection and provide direct aid to those affected there are key industries that are bearing the brunt of this breakout. Airlines have been significantly affected, as carrying international passengers has been curtailed throughout the epicentre and peripheral nations. It has been calculated that British Airways will have lost 24,000 passengers scheduled to fly in February and this could double in March. Cathay Pacific has cancelled 90% of their flights to China and has asked it’s 27,000 employees to take unpaid leave.
Oil production has been affected by the demand that China normally represents – being about 75% of growth in demand globally. Huge tankers are not able to deliver their enormous oil payloads into China and are simply stuck awaiting direction. As this demand shrinks the price of Brent crude has experienced some real volatility and this also has affecting ship chartering and other structural costs involved with the transport of oil.
Banks and insurers are clearly going to be affected by the unsettlement which is likely to be seen in a reduction of earnings for them and a reduction of debt issued. Small businesses could be at significant risk and certainly travel insurers will have their hands full at this time. By no means is this an exhaustive list of affected sectors, but the point is clear – there could be both a huge cost in terms of lives and also materials of an outbreak such as this.
Rates as at time of writing:
EURUSD - 1.0828
GBPEUR - 1.1979
GBPUSD - 1.2971
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