Pound (GBP) Lifted by Stimulus Hopes
The Pound (GBP) ticked higher mid-week as markets welcomed efforts by the Bank of England (BoE) and Treasury to shore up the UK against the economic impact of the coronavirus.
This involved the two working in tandem to deliver their response, with the BoE cutting interest rates back to record lows and the UK’s Budget containing a pledge of £30bn in stimulus to help support the UK economy.
GBP investors appeared cheered by the response on hopes it will help UK businesses survive the short-term shock posed by the coronavirus.
Euro (EUR) Muted Ahead of ECB Rate Decision
The Euro (EUR) was mostly rangebound through yesterday’s trading session, with the single currency struggling after European Central Bank President Christine Lagarde warned of the potential impact of the coronavirus on the Eurozone economy.
In a stark warning to EU leaders Lagarde said the impact could be comparative to that of the 2008 crash unless governments are willing to provide more fiscal support.
The ECB will deliver its latest rate decision later today.
While economists are forecasting another round of monetary stimulus from the bank, any moves are likely to prove highly limited given interest rates are already at zero.
US Dollar (USD) Fluctuates on Stimulus Doubts
The US Dollar (USD) traded in a wide range yesterday, initially reversing some of Tuesday’s gains as observers began to express their doubts over Trump’s ability to pass the ‘big’ tax cuts he had promised in response to the coronavirus.
The ‘Greenback’s losses came in spite of the US consumer price index revealing core inflation shot up to 2.4% in February.
However, the US Dollar was able to claw back some of its losses after Trump announced his European travel ban, spurring some investors to move back to the safe-haven currency.
Looking ahead, USD investors will remain focused on the US government’s response to the coronavirus crisis, with the US Dollar remaining on the defensive so long as it looks unlikely Trump will secure his plans for a payroll tax cut.
Canadian Dollar (CAD) Dented by Sliding Oil Prices
The Canadian Dollar (CAD) stumbled on Wednesday, with the oil-sensitive currency coming under pressure as crude prices fell by around 4% amid Saudi Arabia’s ongoing price war with Russia.
Australian Dollar (AUD) Tumbles During Risk-Off Trade
The Australian Dollar (AUD) fell back overnight on Wednesday as Trump’s move to suspend all travel from Europe shook markets.
New Zealand Dollar (NZD) Muted on Coronavirus Fears
The New Zealand Dollar (NZD) also struggled in overnight trade as growing concerns over the economic impact of the coronavirus continued to dent the appeal of the risk-sensitive ‘Kiwi’.