The Pound trended lower versus the Euro on Tuesday. Pound versus Euro exchange rate declined -0.5% to close the session at €1.1407, approximately the lower end of its traded range as coronavirus fears and Brexit concerns dominated trade.
Today, at 06:30 UTC, GBP/EUR was trading a further down -0.2% at €1.1383 as investors looked to the safe haven euro and ahead to the UK Budget.
Coronavirus Budget
Chancellor, Rishi Sunak, only took over as Chancellor of the Exchequer a month ago. Within that one-month conditions have changed significantly. With coronavirus threatening to derail UK growth investors will be looking for sufficient fiscal stimulus from the Chancellor to prevent what should be a hard but relatively short-lived shock to the UK economy, turning into a more entrenched economic slowdown or even a recession.
Investors will be hoping for measures to support small business, helping them to stay afloat when demand slows considerably, as consumers remain in their house in isolation or sick. The National Health Service is also expected to receive help to cope with a tough few months ahead.
The overall expectation is that the Chancellor will be generous in the fight to contain the virus and limit the economic damage. Additionally, a small tax cut, potential changes to stamp duty or housing tax, and money for flooding could also be announced. The pound could fall lower if investors don’t believe that the Budget goes far enough in tackling coronavirus’ economic impact.
Safe Haven Flows Boost Euro
The euro is heading higher across the board in early trade on Wednesday, benefiting from safe haven flows as coronavirus fears intensify. With the US now at 1000 cases fears on the impact that the virus will have on businesses and consumption across the globe is weighing on sentiment.
The euro is rising despite Italy now being on complete lock down, as the Government attempts to control the rapid spread of coronavirus. With over 10,000 infected and 500 deaths, the eurozone’s third largest economy has come to a standstill. Up until now the euro has remained resilient. However, concerns of recession in the eurozone could soon weigh on the common currency.
There is no high impacting eurozone data. Investors will look ahead to Thursday’s European Central Bank interest rate announcement.
