GBP/EUR rates have dropped again over the weekend, following UK Prime Minister Boris Johnson’s decision to close all pubs, clubs and restaurants.
The move came amid fears that the UK is on the cusp of a sharp spike in Covid-19 cases, with talk this morning centring around an Italian style lockdown to try and halt the spread of the virus.
GBP/EUR rates saw a week of unprecedented volatility, unlike any in recent memory. The pound fell by almost six cents at the low, trading below 1.06 against the EUR on Wednesday, before recovering these losses in the latter part of the trading week. By the close of European trading on Friday the pound was just under 1.11 against the EUR, only to see a further two cents wiped off its value by this morning, with the pair currently trading below 1.09 again on the interbank.
The Bank of England (BoE) tried to bring some stability to the markets by cutting interest rates to 0.1% and also offering fiscal and monetary support, and this seemed to help stem the downturn for a period of time, although this morning losses will once again cause concern for investors.
This morning’s reports have indicated that the UK economy will be forced into a recession due to the current strain on UK business due to the Covid-19 virus, and it is likely the BoE and UK government will have to step in again to offer further monetary support, in order to help curb any long-term damage that could be caused by the current crisis.
Investors will be keeping a close on this week’s developments, as talk of an Italian style lockdown continues to gather pace. Any full shutdown is likely to have a negative impact on the UK economy and as such, the Pound could once again find itself under pressure.
The government have stepped in to offer financial support to employers, although whether these measures are going to be enough to help curb any further losses for Sterling are hard to gauge.
With the pound starting to come under pressure again this morning, it seems as though the reports emanating in regards to the potential lockdown for the UK are already causing GBP to weaken.
Whilst the EUR itself is not immune to the current crisis by any means, it would seem for the time being at least, that the pound is seen as the riskier of the two currencies by investors.
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