Currency Note

Pound set for another volatile week

By Christopher Nye March 16th, 2020

pound weakened

The pound is down against the euro, after a week of heightened worries over the disruption of coronavirus. The Bank of England introduced an emergency rate cut of 0.5%, while the ECB, with hands largely tied on rates, announced a boost to its stimulus programme.

The Federal Reserve made another emergency interest rate cut yesterday ahead of their official meeting this week. The dollar is weaker this morning as a result.

This week will see a raft of economic releases, including European balance of trade, American industrial figures, British employment and more.

The markets are in an even more unpredictable period than usual, so don’t leave your business unprotected. It’s never too late – lock in today’s exchange rate now with a forward contract for up to two years by calling your Business Trader on 020 7898 0500. We’re open as usual, so please don’t hesitate to contact us if you need us.

GBP: Bailey takes over at BoE

The pound weakened to 5-month lows on Friday, suffering from a week of coronavirus related news, including an emergency interest rate cut from the Bank of England. However, sterling is stronger against the dollar this morning as the greenback is suffering due to an emergency rate cut from the Federal Reserve.

Today, Andrew Bailey will take over from Mark Carney as Governor of the Bank of England. He has come in at a crucial time for the Bank and due to his experience, is seen by many as a ‘safe pair of hands’. It will be interesting to see if the Bank of England make another rate cut at their monetary policy meeting next week, or even before then.

The FTSE 100 has fallen to an 8 year low this morning, and travel and holiday stocks are plunging. Boris Johnson will now hold daily coronavirus press briefings and is due to chair another Cobra meeting this afternoon.

This week is light on data for the UK, however we will see Average Earnings and employment figures tomorrow.

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EUR: Euro up against pound after choppy week

The euro has started the week slightly up against the pound after a tumultuous few days. As coronavirus cases grew throughout the European Union, and Italy extended its ‘red zone’ to include the entire country, the ECB announced billions of euros’ worth of additional stimulus measures. However, with no room to manoeuvre on interest rates, there were no cuts as in the US and UK.

In more positive news, Eurozone industrial production, while still shrinking, edged closer towards positive figures year-on-year last Thursday.

Tomorrow, we will see Eurozone and German economic sentiment, as well as wage growth and labour cost figures.

USD: Fed make another emergency rate cut

The Federal Reserve made another emergency interest rate cut yesterday, causing the dollar to weaken. Rates have now been cut to zero in order to support the economy during this coronavirus pandemic, with the Fed saying that it is “prepared to use its full range of tools to support the flow of credit to households and businesses.” They also made the decision to restart their quantitative easing programme. The central bank will meet this week and publish its economic projections on Wednesday.

The dollar rebounded against most currencies at the end of last week. This was due to its safe haven status and US yields rising as coronavirus fears continue to dominate the market.

It’s a busy week of data for the US, with retail sales and industrial production figures released tomorrow. The Federal Reserve will also release their interest rate decision on Wednesday, which could result in another rate cut.

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