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Pound falls as BoE highlights potential for additional rate cut

business-articlesPound falls as BoE highlights potential for additional rate cut
  • Cautious BoE minutes weigh heavily on pound
  • Euro bounces back thanks to German spending pledge
  • Additional Fed rate cut undermines USD
 
Pound under pressure thanks to risk of further BoE action
 
The pound experienced another round of selling pressure on Friday after the release of the minutes from the Bank of England’s (BoE) emergency policy meeting.
 
Policymakers showed a willingness to cut interest rates further if necessary , leaving GBP exchange rates on the back foot.
 
Sterling was also driven lower by the release of the EU’s 441-page draft treaty regarding trade talks with the UK.
 
The document laid bare the division between the EU and UK over their future relationship, with Brussel’s aim to ensure ‘uniform implementation’ of EU rules on state aid and authority of the European court of justice over British courts likely being impossible for UK negotiators to accept.
 
For GBP investors the focus will be on the UK’s coronavirus situation and whether the government takes action to limit the spread of the virus.
 
 
German government spending pledge boosts euro
 
Support for the euro picked up ahead of the weekend as the German government surprised markets by removing its fiscal restraints.
 
The prospect of increased government spending gave investors incentive to pile into the single currency as worries over the outlook of the Eurozone’s powerhouse economy dulled.
 
While no change is expected from the finalised Italian consumer price index for February this could still put a dampener on EUR exchange rates.
 
With the Italian economy coming under increasing pressure as a result of Covid-19 any underwhelming data could weigh on the euro.
 
 
US dollar fluctuates as Fed cuts interest rates
 
The US dollar remained in a position of strength on Friday, with the safe-haven currency in high demand as coronavirus panic continued to grip markets.
However, any upside in USD exchange rates could be tempered after the Federal Reserve slashed interest rates to near zero over the weekend in an effort to limit the economic impact of the coronavirus.
 
Upcoming Data:
 
Monday, 16th March 2020
09:00 EUR Italy Consumer Price Index
12:30 USD Empire State Manufacturing Index
 
 
Philip McHugh

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)

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