The British pound is lower against the euro on Wednesday after one central banker from Europe seemingly threw in the towel on further monetary stimulus. While a sharp rise in the number of coronavirus cases raised questions over the speed of the UK government’s response.
Pound versus Euro was down by 124 pips (-1.12%) to 1.0836 with a daily range of 1.0784 to 1.1027 of 3pm GMT.
GBP/EUR gave up initial gains to trade sharply lower to below 1.08 before finding a base in the afternoon. Losses for the week already stand at -1.91%.
Euro spikes after Holzmann says ECB reached its limit
The euro jumped on Wednesday after one central banker suggested no more monetary easing, which would typically weaken a currency when enacted.
The European Central Bank was forced to issue a statement to try to calm markets on Wednesday following what some have called truthful and other have called irresponsible remarks from one of its Governing Council Members.
The statement read: “The ECB stands ready to adjust all of its measures, as appropriate, should this be needed to safeguard liquidity conditions in the banking system and to ensure the smooth transmission of its monetary policy in all jurisdictions.”
It was made in response to comments by Austrian central bank governor Robert Holzmann in a newspaper interview. Holzmann had suggested that the Governing Council of the ECB had reached its limits and that the primary responsibility for tackling the coronavirus rests with fiscal, not monetary policy. There maybe some truth to it but it certainly did not inspire much confidence n markets.
In what has turned out to be a difficult day in the office for the ECB, the central bank had to act through the Bank of Italy to buy Italian government debt. Italian bond yields were on course for their biggest daily jump since the European debt crisis. Investors have been dumping Italian government bonds for the safety of more stable debt like that of Germany as Italy tries to fight off a brutal coronavirus outbreak that has been the worst in Europe.
