- Pound (GBP) trades at 6 week low on second wave fears
- Gatherings of over 6 people banned
- Euro trade broadly lower versus major peers ahead of ECB meeting tomorrow
- ECB could try to talk down the value of the Euro
After falling over 1% across the previous session, the Pound Euro (GBP/EUR) exchange rate is trading lower again on Wednesday. The pair settled -1.07% at €1.1020. At 05:15 UTC, GBP/EUR trades -0.1% as it tests support at €1.10 a 6 week low.
There isn’t much for the Pound to be positive about on Wednesday as coronavirus news dominates. The government has announced emergency action to try to stem the resurgence of coronavirus by banning all gatherings of more than 6 people in the UK. The drastic action has come as the number of new daily cases spikes, with 8000 new infections over the past 3 days, prompting fears of a second wave of infections in the UK. At the same time the government has also tightened lockdown restrictions in Bolton.
Adding to the downbeat news, AstraZeneca has halted its vaccine trials after a suspected adverse reaction was seen in one candidate in the UK. The AstraZeneca and Oxford university vaccine is a front runner in the race for a vaccine. Whilst this is a standard procedure if someone has an unexplained reaction it is still hitting sentiment. As a vaccine is the surest way to return economic growth to pre-covid levels.
Whilst the Euro is pushing higher versus the Pound it is trading broadly lower versus its major peers as investors look ahead to what is expected to be a dovish European Central Bank meeting tomorrow.
The ECB’s Chief Economist Philip Lane has already highlighted that the strength of the Euro is a concern, after the Euro rose to a 2 year high versus the USD. Analysts expect ECB President Christine Lagarde to build on these comments. Whilst the ECB is unlikely to take policy action based on a strong Euro, they could try to talk its value down.
