The Pound has tanked lower versus the Euro across the European session on Monday as panic grips the financial markets. A combination of an oil price war, escalating coronavirus outbreak and fiscal stimulus from Germany is driving the pair, which hit a 5 month low.
At 13:30 UTC, GBP/EUR is trading 131 points (-1.1%) lower at €1.1414. Pound versus Euro rate has traded a range of €1.1398 – €1.1552.
Pound Drops On Manic Monday
The pound is dropping hard versus the euro an extremely volatile Monday amid fresh market panic over the coronavirus outbreak and the sharp falls in oil prices.
Investors are trying to gauge the potential impact of these two events on the global economy, which has created a strong risk off atmosphere. Whilst the pound was falling versus the euro is was also gaining versus perceived riskier currencies. Meanwhile the UK stock market plunged 8.5% at its worst.
So far, the reaction from the Bank of England has been one of relative calm with both the outgoing governor, Mark Carney and the incoming governor Andrew Bailey saying they are in no rush to act.
Euro Jumps On German Stimulus Package
The euro is one of the few markers which has jumped on Monday despite economists predicting a eurozone recession as coronavirus spreads rapidly across the region. Sentix investor sentiment also revealed a eye watering decline in investor confidence. Investor confidence collapsed in March hitting a 7 year low amid concerns over the impact of coronavirus on the economy.
Yet despite recession fears that have seen the Euro Stoxx index tank 8.4% at the time of writing, the euro was pushing northwards following a German fiscal stimulus announcement.
The German government unveiled a package to help companies hit by the coronavirus outbreak and announced an additional €12. 4 billion in state investment as fears grow that the coronavirus outbreak could push the fragile eurozone economy into recession. The package was designed to address increasingly desperate calls from businesses. However, it also stops short of what many of these businesses were hoping for.
Attention will now turn towards the ECB which is due to make a monetary policy announcement on Thursday, when it decides how to respond to the coronavirus.
