Coronavirus declared Pandemic, UK pledges £30 billion fund to combat effects.

The Pound Sterling and Euro continue to be volatile today with major announcements from the Bank of England and the Coronavirus situation now officially declared a global pandemic by the world health organisation. The first announcement was the Bank of England’s rate cut which saw the interest rate drop from 0.75% to 0.25%, significant as this came after the official rate decision meeting.  Following the announcement the pound saw an instant sell off response.

Shortly after the UK Chancellor of the Exchequer announced that the UK plans a £30 billion injection to shore the UK economy up against the significant effect the COVID-19 virus continues to have on the world

The Eurozone is also awaiting its ECB decision later today which could see the euro shift up. However with President Trump issuing a presidential proclamation stating that those travelling from the 26 countries in the Schengen border-free travel area were barred for the next 14 days the Euro will likely remain under further pressure. Unusually and possibly for political reasons the UK has been left out of the sweeping travel ban.

Yesterday saw the UK’s 2020 budget announced by the Chancellor of the Exchequer following persistent pressure applied by the coronavirus outbreak on the UK’s economy. The virus has now spread throughout the UK, with the number of confirmed cases rising to well over 400 individuals. The pound has seen sustained pressure from the coronavirus as investors worried that the threat could dry up foreign investment in the UK.

UK Chancellor of the Exchequer, Rishi Sunak stated that the UK government will allocate £30 billion for immediate use in combatting the ongoing global crisis caused by the coronavirus. It was a measure aimed at boosting investor confidence in the UK economy. The Chancellor attempted to assuage the public’s rising fears by stating any damage to the UK economy would be temporary.

The outlook for the rest of the week is one of continued volatility, much of which is dominated by the rapidly developing coronavirus situation. All bets are off as to wear the cards will full as much will be dependent on how the pandemic progresses and its duration.

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Coronavirus sends Pound free falling. Overreaction or here to stay?

The Pound has has seen its largest decline against the Euro since the crash of 2016 and further losses cannot be ruled out for the days ahead given a strong economic performance from the Euro and the ever alarming coronavirus situation that could weigh disproportionately on the Pound Sterling.

Sterling has endured heavy losses in the last few days as further cases of Covid-19 are confirmed throughout the world and now the United Kingdom with 36 cases being confirmed here as of this morning.

The situation continues to evolve rapidly and many central bank sources believe that the markets may be blowing it out of proportion as alarm causes sell offs and billions are wiped off the stock markets.

Furthermore if the World Health Organisation (WHO) declares a pandemic I believe further sell offs and a decline in the strength of the Pound among other affected currencies across the globe.

However with the Americans beginning human trials on a vaccine we may see a sense of calm return to the markets if the worlds governments can contain Covid-19’s spread and gain an upper hand on the virus.

There are no major economic figures expected from the UK in the week ahead although the Brexit negotiations will begin in the shadow of the coronavirus story and with each side having conflicting demands and a confrontational stance we could see some volatile movements on the currency markets. 

This matters for the Pound in the medium term after the government said last week the UK could walk away from the trade talks with the EU if the broad outline of a deal has not been reached before June.

The Euro outperformed all major currencies other than the Japanese Yen last week as global stock markets fell apart and investors walked away from emerging market currencies in their droves. This looks set to continue in the short-term putting further pressure on the Pound although analysts say that the single currency will come back down to earth before long.

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