The risk-on rally that had carried Sterling higher over the past few sessions started to cool with the long awaited US stimulus bill finally agreed upon. There was an element of ‘buy the rumour, sell the news’.
The euro might have gained more ground against the pound but it is being plagued by rising coronavirus cases, especially in Spain and very soft economic data.
Pound versus Euro was down by 15 pips (-0.157%) to 1.0882 with a daily range of 1.0780 to 1.1044 as of 4pm GMT.
GBP/EUR has given up morning gains that took it above 1.10 with a 200 pip slump that took it close to 1.08, leaving it flat on the week at -0.06%.
British pound tracks global sentiment
FX markets continue to adopt a risk on / risk off mentality. The pound gained early on but gains disappeared as stock markets edged lower but then reappeared when stocks moved higher by over 3% in the afternoon.
There was inflation data from the United Kingdom but for February so it proved of little interest to currency speculators, who dismissed it as inconsequential because it does not factor in the coronavirus. The UK CPU rose by 1.7% y/y in February.
The biggest news of the day was that the United States Congress had agreed a massive new spending plan of $2 trillion. The coronavirus is expected to be a big problem for the United States but the extra government spending goes a long way to avoid a long and problematic recession.
Euro hit by biggest drop in German confidence since reunification
The drop in German business morale and the negative implications that have for the euro were plain to see from today’s German IFO figures. The business climate index dropped a whole 10 points from 96 to 86.1. IFO President Clemens Fuest commented alongside the release that “This is the steepest fall ever recorded since German reunification and the lowest value since July 2009.”