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GBP/EUR plummets to four-month low as BoE hints at stimulus to combat impact of coronavirus

currency-newsGBP/EUR plummets to four-month low as BoE hints at stimulus to combat impact of coronavirus
The pound fell off a cliff at the start of this week’s session after the Bank of England (BoE) suggested it would alter monetary policy in an effort to limit the economic impact of the coronavirus.

Sterling is showing signs of recovery this morning however, with GBP/EUR rallying to €1.1510 and GBP/USD ticking up to $1.2804. GBP/CAD has jumped to C$1.7110, while GBP/AUD and GBP/NZD are holding steady at AU$1.9531 and NZ$2.0423 respectively.

Coming up, the Eurozone’s consumer price index may draw the most attention today. Will a slide in inflation last month exert some pressure on the euro?

What’s been happening?      

The pound got off to a dire start this week, stumbling out of the gate after the BoE vowed to take ‘all necessary steps, to protect financial and monetary stability’ from the coronavirus.

This was widely interpreted as a signal of a possible interest rate cut from the BoE this month, with the odds of a March cut rising to 63% according to CME’s BoEWatch tool.

In signalling the possibility of a rate cut, the BoE joins the Federal Reserve in promising to act to limit the impact of the coronavirus.

This saw the US dollar also face pressure yesterday as USD investors began to price in a March rate cut of 50 basis points.

Amidst the weakness of its peers the euro roared higher on Monday, with the appeal of the single currency also being bolstered by comments from European Central Bank (ECB) policymaker Pierre Wunsch, who urged the bank not to ‘rush to fire our remaining fiscal ammunition’ in tackling the coronavirus.

What’s coming up?

Looking ahead, the euro may suffer a setback this morning with the publication of the Eurozone’s consumer price index.

This comes as economists forecast today’s CPI figures will report inflation in the Eurozone slowed again last month.

For GBP investors the focus will be on the UK’s latest construction PMI, where an expected improvement in construction activity last month may offer some support to the Pound.

In the US, the Democratic primaries are in the spotlight, with the US dollar potentially experiencing volatility if left-wing firebrand Bernie Sanders emerges victorious.
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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