The Pound is edging lower versus the Euro as the US session is about to begin. Coronavirus remains in focus as well as speculation surrounding Brexit and the UK Budget.
At 13:30 UTC, GBP/EUR is trading -20 points (-.17%) at €1.1448.
This Pound versus Euro rate is towards the lower end of the days’ trading range of €1.1434 – €1.1520.
Pound Drops Ahead Of Tomorrow’s Budget
The Pound was on the back foot on Tuesday after a report showed that coronavirus has triggered a collapse in business confidence. The outbreak of coronavirus has wiped out the Boris bounce, the increase in business confidence that the UK experienced following the decisive Conservative win in the UK general election.
According to the Institute of Directors, 1 in 5 business directors said that coronavirus possess a severe threat to their business. A further 40% saw the virus as a moderate threat. This is the first survey which shows how companies are handling the disruption caused by coronavirus.
Investors will now look ahead to the Chancellor Rishi Sunak’s Budget. The Budget is expected to focus on firm measures to ensure that this temporary sharp shock to the UK economy doesn’t become a deeper more entrenched slowdown. If the market doesn’t consider that Rishi Sunak goes far enough with his spending to prop up the economy, the pound could fall sharply lower.
There is also growing speculation that the Bank of England could also announce monetary stimulus tomorrow. However, this would raise serious questions over the central bank’s independence, meaning these are most likely just rumours.
Euro Looks To ECB Amid Italian Lock Down
The euro is still advancing despite the situation in Italy worsening. Italian Prime Minister Guiseppe Conte has moved from locking down the north of the country, to locking down the entire country in a matter of 48 hours.
Spain, France and Germany have also ramped up efforts to slow the spread of coronavirus, adopting measures which will have an economic impact, even if short term.
Investors will look ahead to the ECB meeting on Thursday for clues as to how the central bank intends to support the fragile economy.
