The pound started the week off on the back foot against a number of different currencies after further negative news concerning the Coronavirus outbreak. The pound dropped to its lowest level vs the euro since early October which is the lowest rate to buy euros in 6 months.
In the meantime, the pound dramatically strengthened against a number of the commodity based currencies including the Australian dollar, New Zealand dollar and the South African rand. At the same time the pound lost over 3% against the Japanese yen as global investors sought out the Yen as a safe haven currency.
Brent oil futures fell by over 30% at one point during yesterday’s trading session owing to the risk of Coid-19 and the uncertainty involved.
The UK Budget is due to be released on Wednesday and if there is any economic stimulus this could help sterling exchange rates in the short term as it could also determine whether the Bank of England may look to change policy when it meets towards the end of this month.
The euro is now trading at its best level against the pound in 6 months after German industrial production data showed an improvement of 3% in January following a 2.2% decline in December.
The single currency has also improved against the US dollar by over 1% yesterday. EURUSD exchange rates are currently at their highest level since June 2019 and it appears as though the euro is also being used as a safe haven currency rather than the US dollar.
The European Central Bank (ECB) are due to hold their latest monetary policy meeting on Thursday. With the US Federal Reserve and the Bank of Canada having already cut interest rates could the ECB follow suit? The issue the ECB has is that interest rates are already negative so if they are to do something could they consider further Quantitative Easing instead?
The US dollar has been weakening against both the pound and the euro during the last few days as it has emerged that the Coronavirus has been found in the US.
One of the leading experts in the US on infectious diseases has suggested that officials ‘may have to order regional lockdowns in the near future.’ According to the latest statistics there are now a total of 545 cases in the US and a number of states in the US has declared emergencies. Indeed, reports confirm that the virus has now touched 95 countries and that number is likely to continue to rise.
Oil prices have dropped by the largest amount since 1991 during the Gulf War. OPEC members are at loggerheads and so Saudi Arabia has cut its oil prices owing to Russia’s decision to not cut oil production.
The US also suspended stock market trading during yesterday’s trading session for 15 minutes as the Dow Jones plummeted by 2,033 points, so things are getting very serious very quickly.
With so much uncertainty caused by the Coronavirus then markets have been moving a huge amount in the last few days so make sure you keep in close contact with your account manager.
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