The Pond versus euro sunk 1%in the previous session at its worst before clawing back some losses to close 0.3% lower. German fiscal stimulus optimism in addition to the euro’s low exposure to the price of oil helped lift the common currency on Monday amid turmoil in the financial markets.
Today the Pound is showing signs of recovery and the euro is easing lower ahead of the GDP release.
At 06:30 UTC GBP/EUR is trading 0.1% higher at €1.1483, slightly off the high of €1.1510 in the Asian session
Pound Looks To Budget
The pound fell versus the stronger euro in the previous session, amid a steep sell off in the UK stock market. The FTSE 100 closed the session 7.7% lower in its worst day of trading since 2016, as the negative impact of coronavirus on the economy and an oil price war between Russia and Saudi Arabia lead to fears that the global economy is on the brink of a recession.
Today risk sentiment is rebounding and Pound investors will now look towards the Chancellor’s budget on Wednesday for clues as to whether fiscal stimulus is on the cards and whether it will be sufficient to support the UK economy in the face of the fallout from coronavirus.
Euro Pares Gain On Improved Risk Sentiment
The euro has been on the front foot despite Italy being one of the principal areas of concern in the coronavirus outbreak. The whole of Italy is now being put under lock down in a bid to contain the spread of the virus. With more than 9000 infections and 463 deaths, all public gatherings have been suspended and movement is being restricted.
Today risk recovery has been the main theme across the Asian session and his has resulted in the euro rally losing traction.
The euro also remains pressurised in early trade on Tuesday as investors look ahead to the European Central Bank meeting later this week and the increased odds that the ECB will cut interest rates. Whilst the already negative interest rate meant that scope for further rate cuts is limited, the market is still pricing in two cuts by June compared to just one last week.
Investors will now look ahead to the release of GDP reading. This is expected to show annual growth of 0.9% in the final quarter. The reaction may be muted to the reading given that it is backward looking an prior to the coronavirus outbreak.
