Coronavirus panic and rate cuts prompts market chaos
[vc_row][vc_column][vc_column_text]Currency markets were rocked last week after a number of central bank’s moved to cut interest rates, as the economic impact of the coronavirus threatens to plunge parts of the world into a recession.
Amidst an extremely chaotic start to the week we have seen GBP/EUR trading close to a five-month low at €1.1436, while GBP/USD has surged to US$1.3110.
Looking to the week ahead, we expect coronavirus headlines to continue to dominate market sentiment and infuse further volatility into the currency market.
Pound rocked by BoE rate cut speculation
The pound traded in a wide range last week, driven by Bank of England (BoE) rate speculation and Brexit uncertainty.
This kicked off with a 1% plunge in GBP exchange rates at the start of the week after the BoE fueled expectations for an immediate rate cut by vowing to take ‘all necessary steps’ to limit the economic impact of the coronavirus.
These expectations were further stoked by the Federal Reserve’s announcement of an emergency rate cut on Tuesday.
Fortunately for GBP investors the pound began to mount a comeback in the mid-week, rallying on the back of comments from incoming BoE Governor Andrew Bailey, as he suggested the bank would need more evidence regarding the economic impact of the coronavirus before it would make a move.
Tempering these gains however was the conclusion of the first round of trade negotiations between the UK and EU, which laid bare the divisions between the two sides over a number of key issues.
Coming up this week, the spotlight for GBP investors will be on the publication of the UK’s long-awaited Budget.
Expectations for some ambitious spending from the government was a major source of support for the pound through February.
However since then we have seen the coronavirus crisis come to engulf almost everything else. Will this result in a weaker pound if this forces the government to issue a more conservative ‘coronavirus Budget’?[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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