After the Bank of England slashed interest rates to the lowest level ever, in the second emergency rate cut this year, the Pound finished the session higher versus the Euro.
The Pound versus Euro exchange rate closed Thursday’s session 1.3% higher at €1.0743, slightly off the high of €1.10964, but well above the low of €1.0523
Today at 06:30 UTC, GBP/EUR is trading 0.9% higher at €1.0835 as investors continue to monitor coronavirus developments and assess the impact of central bank action.
Pound Rallies As Rates Cut To Historical Low
The Pound soared midway through the US session after the Bank of England cut interest rates for the second time in just over a week. The move by Andrew Bailey, the new Bank of England governor, brought rates down from 0.25% to 0.1%. This is the lowest that interest rates have been in the central bank’s 325-year history.
In addition to cutting interest rates, the Bank of England said it would also increase its holding of UK gilts by £200 billion. The moves come following a 0.5% rate cut last week by the old Governor Mark Carney, as well as other measures, designed to help both businesses and individuals cope with the economic damage caused by the coronavirus.
Usually this type of monetary easing would pull a currency lower. However, these are not usual times. Investors are looking to central banks for support and as a result the currencies jumps when bold action is taken
Today Chancellor Rishi Sunak will launch a massive rescue package for British companies and workers. The measures aim to help companies retain staff through the crisis and the help prevent them from going out of business.
Italy Calls For ECB To Do More
The euro traded with a negative bias after the release of German Ifo business sentiment data in the previous session. German’s most prominent leading indicator came in at 87.7 in March, down from 96.0 in February. This was the sharpest month drop ever. The Ifo Index is now at levels last seen in the financial crisis.
The data reflects the unprecedented turnaround experienced in eurozone economies within just one month. This sentiment data gives a snapshot look at the size of the economic hit, however it doesn’t say anything about the future.
Elsewhere Italy’s Prime Minister Giuseppe Conte praised the European Central for the action that it had taken so far. However, he called on the central bank to do more and release the €500 million European Stability Mechanism.
