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It was a choppy day for the pound yesterday against the euro and dollar, as fears over the impact of coronavirus on the global economy continued to heighten. However, sterling has stabilised slightly this morning. Consumer confidence in the Eurozone dropped to a six-year low, and manufacturing figures from the UK are expected to fall below 50 today.
The UK government announced stringent new measures for the general public yesterday evening, which will be in place for at least the next three weeks.
Central banks are pushing for further action to help the crisis, with the Federal Reserve launching a new lending facility to help mutual funds, and ECB policymakers calling on EU national governments to present a cohesive response.
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GBP: Government ramps up measures
The pound was volatile against the euro and the dollar yesterday as investors fled to safe-haven currencies, such as the greenback. However, sterling is stronger against the dollar this morning.
Sterling has also been hit by concerns that Britain’s approach to dealing with the virus is inadequate. It could be said the that UK has seen a more staggered disruption to economic and everyday life than other countries. However, yesterday the government released a set of new rules which state that the public should only leave the house to buy food, to exercise once a day and to travel to and from work where “absolutely necessary.”
MPs passed an emergency coronavirus bill, which passed through the House of Commons this evening. The 87 clauses that make up the bill give the government wide-ranging powers, unlike any other recent legislation. Health Secretary Matt Hancock stressed that the powers would only be used “when strictly necessary.”
EUR: Consumer confidence at six-year low
Euro was choppy against the pound yesterday, after consumer confidence figures hit a six-year low in the Eurozone. Fears of continued economic disruption, as elsewhere, continue, with many expecting France’s lockdown to be extended. In Italy, the rate of coronavirus infections has started to slow.
This morning, German and French manufacturing figures have shrunk markedly, although it is was the markets have been expecting in the current situation. Nonetheless, it will not help to calm fears about the damage to the economy.
Senior ECB policymakers have continued to call on national governments to provide a cohesive response across the Eurozone to the coronavirus crisis. Carlos Costa, also Governor of the Bank of Portugal, said yesterday, ‘Failure to cooperate in this crisis would permanently scar the European project…Solutions must be found in order to avoid that the coronavirus emergency becomes a second sovereign debt crisis.’
USD: Fed take unprecedented steps to combat coronavirus
The dollar is weaker this morning after the Federal Reserve took unprecedented steps to backstop a range of debt and introduced unlimited quantitative easing to mitigate the effects of coronavirus.
These new measures raised concerns that the stimulus provided so far has not been enough to protect the US economy.
Today, there will be a series of PMI data releases for the US, which will provide further insight into the state of the economy.
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