After rallying to a peak of €1.1307, the Pound has surrendered these gains heading into the start of the US session.
The Pound versus Euro (GBP/EUR) exchange rate is trading flat at €1.1235, approximately in the middle of its daily range of €1.1185 – €1.1307.
Pound Questions Boris’ Plan
The Pound is trading with a negative bias versus its major peers, following the release if the minutes to the unscheduled BoE policy meeting earlier in the week. This was the meeting when the BoE voted to cut interest rates by 50 basis points.
The minutes show that the BoE expect UK economic activity to weaken over the coming week and months. The central bank said that they will also have more information on the size of that hit as data starts coming through over Q2. The BoE believes there are still tools in its toolbox and another rate cut is possible.
Pound investors also appear to be questioning Boris Johnson’s approach to coronavirus. UK school are still open, while schools across Europe and the US are closing. There is no ban on large scale public meetings in England yet. A lack of confidence in the approach means that pound investors are expecting bigger financial hit as the virus spreads uncontrolled across the UK.
In addition to the coronavirus hit to the economy, Pound investors are also fretting about its impact on post Brexit trade talks. Talks next week have been postponed. This put pressure on an already tight timeline.
Euro Picks Up On Spending Optimism
The Euro is also struggling across the board on Friday as investors are unimpressed by the European Central Bank’s moves in the previous session. The ECB refrained from cutting interest rates as the market had expected and offered smaller more target measures.
The common currency is picking up at the start o the US session after Germany pledged unlimited spending to dull the economic impact of the coronavirus. The German finance minister said that Germany may need to take on additional debt to finance the spending. The European Commission has also given the green light to fiscal stimulus across the region should the situation deteriorate.
