Currency Note

Pound hits 6-month low against euro

By Christopher Nye March 17th, 2020


Sterling weakened to a 6-month low against the euro yesterday as coronavirus worries continue. In his first daily press conference, the Prime Minister advised everyone to avoid social contact and non-essential travel. The pound remains weak this morning on rising expectations that the Bank of England could introduce a new batch of quantitative easing.

Despite a second emergency interest rate cut from the Federal Reserve, the markets are still suffering. The dollar was fairly choppy against the pound yesterday, although it’s still benefitting from its status as a ‘safe haven’ currency.

Meanwhile in the Eurozone, predictions of an impending recession didn’t stop the euro from outperforming the pound.

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GBP: BoE could introduce fresh quantitative easing

The pound hit a 6-month low against the euro yesterday as the markets digested a second emergency rate cut from the Federal Reserve. Today, sterling is weak as the expectation for new quantitative easing measures has grown. It’s also thought that the Bank could cut interest rates again, either at their official meeting on the 26th of March or before then.

A group of central banks, including the Bank of England, took co-ordinated action at the beginning of the week to relieve the shortage of dollars and provide extra liquidity. However, the markets still suffered yesterday, with the FTSE 100 closing at an 8-year low.

Yesterday afternoon, Boris Johnson delivered the first of his daily coronavirus press conferences. He has said that everyone should avoid social contact with others and non-essential travel. People have now been advised to work from home where possible and avoid pubs, clubs and other social venues.

Today, the Prime Minister is expected to announce more financial measures to help the economy and businesses.

This morning, there’s a series of data releases for the UK, including average earnings figures and unemployment rate for January.

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EUR: Euro strong against sterling

The euro was strong against the pound yesterday, as the single currency is seen as a safer haven than sterling. This was prompted by the Federal Reserve’s decision to make a second emergency cut to interest rates.

The EU internal market Commissioner, Thierry Breton, stated that the coronavirus pandemic will plunge the European Union into recession this year, saying that it will slash growth by 2-2.5%.

MEP’s called on member states to adopt a more ambitious approach to tackling the economic impact of the virus. The European Commission has proposed a temporary ban on non-essential travel to the European Union.

Germany is the latest EU country to close its borders, only allowing goods and workers to pass through.

USD: Dollar supported by safe haven status

After a brief uplift in the morning, the dollar was choppy against the pound yesterday. Any fall, however, was tempered by its safe haven status, which means the greenback is attractive in times of crisis.

The interest rate cut from the Federal Reserve weakened the dollar slightly, and the Fed are due to meet again at their official meeting this week.

We’ll see a series of data releases for the US today, including retail sale figures, which are expected to drop slightly month-on-month.

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