Pound Sterling Euro (GBP/EUR) Exchange Rate Slumps on Disappointing UK Budget
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate fell, leaving the pairing trading at around €1.1871.
Sterling remained under pressure as expectations of a Bank of England (BoE) rate cut increased.
Added to this, Chancellor Rishi Sunak’s budget remained in focus as many had expected to see an increase in fiscal spending.
However, March’s budget may disappoint as investors are doubtful that Sunak would be able to increase spending enough to stimulate the UK’s economy.
Pound Sterling Euro (GBP/EUR) Exchange Rate Falls as Covid-19 Spreads Through Europe
The Pound Sterling Euro (GBP/EUR) exchange rate slumped, leaving the pairing trading at around €1.1901.
Sterling slipped against the Euro today, as traders worried about the coronavirus becoming a pandemic.
A top official at the US Centers for Disease Control and Prevention (CDC) has urged Americans to prepare for the virus to spread within the country.
Another official stated that it was not a question of if, but when the virus would become a pandemic.
The single currency edged higher despite previously being battered by fears the spread of the virus could weaken the bloc’s economy.
The current risk-off mood has allowed the Euro to rise, despite more than 300 cases and 11 deaths in Italy.
Covid-19 has also spread to several European countries, with Austria, Croatia, and Switzerland announcing cases.
Commenting on this, Mitsubishi Trust Bank’s manager of forex, Tatsuya Chiba said:
‘Markets had been under-estimating the risk of coronavirus but I think that phase is over by now.
‘I would think we will see the peak of fears when people become seriously worried about an epidemic in the United States.’
Yesterday: Sterling (GBP) Rebounds as Traders Move Away from USD
The Pound was able to rebound on Tuesday as markets fretting over the spread of Covid-19 found some stability.
This caused traders to move away from the safe-haven US Dollar (USD) and rush back to currencies such as Sterling.
The earlier migration toward the Dollar weighed on the British currency, sending it lower, as virus fears were the main reason for Monday’s selloff.
However, traders continued to worry about the spread of the virus, and whether or not it would become a pandemic.
Meanwhile, markets looked to next week’s trade negotiations between the UK and the European Union. The divisions between the two sides continued to weigh on GBP.
The EU said on Tuesday that the process would be ‘very hard’ and could fail if the UK is unable to secure the Irish border as previously agreed.
Pound Euro Outlook: Weak Eurozone Business Confidence to Weigh on EUR
Looking to Thursday, the Euro (EUR) could slump against the Pound (GBP) following the release of Eurozone business confidence.
If February’s business confidence falls further than expected, it will dampen single currency sentiment.
However, losses could be capped following the release of the bloc’s final consumer confidence measure.
If consumers in the Eurozone are more confident than expected this month, the Pound Euro (GBP/EUR) exchange rate will remain muted.