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BoE announces emergency rate cut, UK Budget in focus

currency-newsBoE announces emergency rate cut, UK Budget in focus
In a surprise move, the Bank of England (BoE) announced this morning that it will be implementing an emergency rate cut in order to help protect the economy from the coronavirus crisis.

Despite the cut the pound is holding its ground this morning, with GBP/EUR stable at €1.1422, GBP/USD buoyed at $1.2937, and GBP/CAD and GBP/AUD holding steady at C$1.7735 and AU$1.9839 respectively.

Only GBP/NZD is showing any notable movement, with the pairing sliding to NZ$2.0508.

Coming up, the UK’s Budget will be in focus today, with GBP investors eager to see what fiscal stimulus there will be to support the BoE’s rate cut.

What’s been happening?            
                                                                          

The pound spent Tuesday buffeted by lingering concerns over Brexit.

The UK government stated yesterday that it has no plans to delay its exit from the Brexit transaction period at the end of the year.

This stoked concerns over a possible no-deal Brexit as the coronavirus threatens to disrupt the timetable for trade negotiations and leave the two sides with even less time to hammer out a new deal.

The euro put on a mixed performance yesterday, with investors spooked by the Italian government’s move to quarantine the entire country, but also welcoming comments from Germany’s Economy Minister Peter Altmaier regarding his government’s plans for billions of euros worth of stimulus.

Meanwhile, the US dollar rebounded on Tuesday, driven higher by optimism over Donald Trump’s proposals for an economic stimulus package.

What’s coming up?

It’s going to be a busy day for GBP investors as they respond to an emergency rate cut from the BoE and the UK’s Spring Budget.

Chancellor Rishi Sunak will deliver what has been deemed the ‘coronavirus Budget’ as the Treasury seeks to support the economy through the coronavirus crisis.

GBP investors are hoping the Chancellor will announce a big increase in spending today, with traders likely to be comforted by the apparent coordination between the BoE and Treasury to shore up economic growth.

In the US the publication of domestic inflation figures will be in focus for USD investors. But with the Federal Reserve already expected to cut interest rates to near zero could the impact on the US dollar prove negligible?

Finally, we expect the euro to experience limited movement today as EUR investors brace for the European Central Bank’s (ECB) policy decision on Thursday.
 
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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