The Pound slid across Monday’s session, hitting a six-month low versus Euro as coronavirus fears continued to dominate trading, The Pound versus Euro exchange rate closed the previous session down 1% below the key €1.10 psychological support.
At 06:30 UTC GBP/EUR is trading at €1.0970 as investors look ahead to UK employment figures and perhaps more importantly ZEW confidence data.
Recession Coming?
The Pound lost ground in the previous session as former Bank of England policy makers warn of the shock that coronavirus will bring to the economy. Disruption to travel and supply chains, offices closing, event cancellations and a steep drop-in social activity are yet to show up in data. However, economists increasingly see it as inevitable that the UK is entering a recession, which will last across the first half of the year. The Bank of England has applied emergency measure such as cutting interest rates by 50 basis points to ensure that the economic scars of the virus don’t outlast the virus itself.
Today there is UK employment data. Analysts are expecting the unemployment rate to remain steady at 3.8% in the three months to January. Average wages are expected to tick higher to 3% up from 2.9%. However, given that the data was from before the coronavirus outbreak investors are unlikely to pay much attention to the numbers.
ZEW Sentiment Data In Focus
The euro held firm across the board in the previous session despite the coronavirus situation escalating in Europe. Italy and Spain have declared state of emergency, German Chancellor Angela Merkel orders a drastic clampdown in Germany. Angela Merkel has order to closure of all but essential shops in an unprecedented post-war period move.
Investors will now look ahead to ZEW sentiment data due today. Analysts are expecting a sharp drop in morale as coronavirus fears take hold. Forecasts are for ZEW sentiment index to drop from 8.7 in February to -26.4 in March. This would be the worst reading since August 2019. There is a good chance that this forecast is too optimistic.
With all things coronavirus moving so quickly, there is also a chance that investors will ignore these figures as old news, even though they are from March; the situation has changed rapidly even over the last day or so.
