The pound was given a small but much-needed boost yesterday and is still stronger this morning. The Bank of England affirmed that they would be willing to take further action to limit the economic fallout from the coronavirus crisis.
The European Central Bank released its monthly economic bulletin, revising GDP growth forecasts down to 0.8% and warning of only ‘modest recovery’ ahead after the coronavirus crisis.
The dollar was down against the pound yesterday after poor economic data, with jobless claims hitting a record high and concerns over the spread of coronavirus throughout North America.
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GBP: Pound stronger as markets stabilise
The pound strengthened against the dollar and the euro yesterday after the Bank of England held its official meeting. The Bank said it was prepared to take further action to limit the economic damage from the coronavirus outbreak. Sterling is still strong this morning but remains vulnerable to coronavirus related news.
As expected, interest rates were held at the current record low of 0.1% by the Bank, after two emergency rate cuts earlier this month.
Later in the day, Chancellor Rishi Sunak announced new details on measures for the UK’s 5 million self-employed workers. The self-employed will be able to apply for a grant of up to £2,500 a month to help them cope with the financial impact of coronavirus.
The global markets have also stabilised, helping the pound to strengthen.
EUR: ECB warns of only modest recovery ahead
The ECB’s economic bulletin, released yesterday, warns of a ‘worsening outlook’ for the global economy as the coronavirus pandemic disrupts supply chains and economy activity. The Bank expects recovery this year to ‘gain only modest traction’. Predictions now point to a 0.8% growth in 2020, revised down by 0.3%.
Government budget balances in the eurozone are expected to continue declining until 2022, largely, the Bank says, attributed to lower primary surpluses.
The bulletin also reiterates the purposes of the European stimulus package, to safeguard liquidity in the bank sector, protect the continued credit flow through the economy and to prevent financial conditions magnifying the impact of the crisis.
The euro had a choppy day against both the pound and the dollar, ending down against both. It was not helped by German consumer confidence coming in far below expectations, at 2.7 rather than the projected 7.1.
This morning, Italian business and consumer confidence data came in largely as expected, both showing a decline. Beyond this, it will be a quiet day for data, so we can expect more movement to come from digesting the implications of actions from earlier in the week.
USD: Jobless rate at record high
The dollar remained weaker against the euro and the pound yesterday. The markets have stabilised slightly, partly due to a new stimulus package from the Federal Reserve.
Federal Reserve Chairman, Jerome Powell, said the central bank will not run out of ammunition. Initial jobless claims data released yesterday showed the largest rise to record high levels. The figure came in at 3.283 million, almost five times the previous historic highs.
Today, personal income figures for February will be released, which are expected to show a decrease month-on-month.
The US now has more coronavirus cases than either China or Italy. The total number of cases in the US has reached 82,404, according to data compiled by John Hopkins University.