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Fed rate cut, EU travel restrictions and coronavirus fears rock markets

currency-newsFed rate cut, EU travel restrictions and coronavirus fears rock markets
We woke to fresh volatility this week as coronavirus fears and the Federal Reserve’s decision to slash interest rates for a second time in as many weeks sent shockwaves through markets.

The pound remains most rangebound this morning, with GBP/EUR stable at €1.10982 and GBP/USD subdued at $1.2232. GBP/CAD is sliding to C$1.7119, while GBP/AUD and GBP/NZD are holding steady at AU$2.0098 and NZ$2.0242 respectively.

Expect to see currency traders remain on their toes as the coronavirus dominates the news flow.

What’s been happening?      

The pound struggled to find support on Monday, with Sterling sentiment fluctuating as the UK government’s ‘heard-immunity’ approach to the coronavirus came under increasing criticism.

The UK is still reluctant to implement any social distancing measures and (unlike its European neighbours) is yet to close schools or restrict public events.

With a growing number of experts questioning the effectiveness of the government’s approach, there appeared to be little appetite for the pound at the start of the week.

The euro found itself in a similar predicament yesterday, fluctuating throughout the session as EU countries introduced even more drastic measures to prevent the spread of the coronavirus, including the restriction of travel to Europe.

Meanwhile, the US dollar initially stumbled at the start of this week following the Federal Reserve’s announcement it would be slashing US interest rates to near zero.

However, it didn’t take long for the safe-haven currency to claw back its losses as demand was buoyed by another dramatic stock market sell-off.

What’s coming up?

Looking ahead it seems likely that movement in the currency market is likely to remain closely tied to coronavirus developments.

However, there are also a few notable data releases which could influence their respective currencies.

In the UK the latest jobs report may offer some modest support for the pound if wage growth rose back above 3% in January as part of a wider post-election bounce.

For EUR investors the focus will be on the latest ZEW surveys, with the euro potentially facing headwinds if economic sentiment in Germany and the wider Eurozone dove this month.

Finally, any further upside in the US dollar could be tempered this afternoon by the latest US retail sales figures if they report a sharper-than-expected slowing of sales growth last month.
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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