GBP/EUR: Pound Claws Back from 4-month Low vs Euro

The British pound is higher against the euro on Tuesday, with Sterling clawing back some the hefty losses felt at the start of the week as the governments and central banks in Europe and the UK offered loose promises of a policy response to the coronavirus.

GBP/EUR was up by 56 pips (+0.47%) at 1.1507 with a daily price range of 1.1436 to 1.1519 as of 1.30pm GMT. Pound versus euro was able to regain the 1.15 handle on Tuesday, having been near 1.20 just a week ago.

Pound regains some of the losses seen on Monday

There have been equal measures of bluster and inaction from authorities on both sides of the English Channel on Tuesday, enabling the British pound to recoup some of the sharp losses seen on Monday and over the previous week. Neither a UK rate cut nor fiscal stimulus in the Eurozone are a dead cert yet.

French Finance Minister Bruno Le Maire set the bar high on the idea of a ‘coordinated fiscal and monetary response’ from the G7 only for a communique from the group do the limbo right underneath it. The G7 stated that they will “use all appropriate policy tools” using “fiscal measures where appropriate” where “central banks will continue to fulfil their mandates.” The lofty promises fall short of actual measures. Le Maire had said yesterday “There will be concerted action.”

The euro

Several policymakers were quick to add their own flavour to the G7 comments. German Finance Minister Scholz said “We have all the means to counter a worldwide slowdown.” Slovakian central banker and ECB governing council member Kazimir said “panic and overreaction could cost us a lot.”

Across the whole storm of public comments made on Tuesday, ECB governing council member Robert Holzman probably offered the best clue about any action from the ECB at its March meeting saying, “monetary policy actions are secondary to fiscal support, the ECB must stay vigilant but not overreact.”

Data from the Eurozone was not front and centre, in part simply because it met expectations. Eurozone January unemployment 7.4% and Eurozone CPI for February was 1.2% y/y.

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