Daily Currency Update

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Coronavirus fears continue to dominate

GBP - British Pound

Sterling continued to trade lower through yesterday’s sessions as markets continued to price in a Bank of England (BoE) interest rate cut. In a sudden remark the central bank vowed to “take all needed steps to protect stability” in the wake of the Coronavirus outbreak.

As such, GBP hit new four and a half month lows against both the USD and Euro. GBP/USD fell below 1.28 to a low of 1.2746 while GBP/EUR drop below the 1.15 level to an intra-day low of 1.1440.

Yesterday also saw UK and European officials sit down in Brussels for the first round of post Brexit trade talks with markets keenly attuned to any sign Britain will accept EU trade rules.
In a report by Bloomberg, siting three unnamed people familiar with the matters, concerns were raised that red lines on both sides could put the chance of an agreement in danger after negotiations return to the Belgian capital on April 6.

If negotiations fail, the U.K. will face crashing out of the bloc’s single market and customs union with no special trading terms in place at the end of this year. That will threaten major disruption to commerce and long-term economic damage, as well as causing alarm for millions of people who live and work in Britain and the EU and travel regularly between the two.

To further compound sterling’s woes, UK manufacturing PMI for February came in below expectations with a print of 51.7 vs 51.8 expected.

Looking ahead to today, markets will turn their attention to UK Inflation report hearing with headlines expected throughout the day.

Key Movers

Across the channel a surprisingly positive manufacturing read from Germany helped the Euro gain further against sterling and pushed EUR/USD above the 1.11 handle.

The US dollar slipped against a basket of major counterparts through trade on Monday as investors increased bets the Federal Reserve will cut interest rates in a bid to combat the downturn forced by the spreading coronavirus.

Comments from Fed Chair Jerome Powell, wherein he committed to acting appropriately to support the economy, weighed on the safe-haven dollar. Markets saw Powell’s comments as guidance an imminent rate cut is on the table with bets the FOMC will cut rates at its March 17-18 meeting fully priced in.

Overnight news from Australia saw their central bank cut interest rates from 0.75% to 0.5% due to coronavirus impact/uncertainty. This sent AUD lower against its major counterparts.

Expected Ranges

GBP/USD: 1.2750 - 1.2850 ▼

GBP/EUR: 1.1450 - 1.1560 ▼

GBP/AUD: 1.9445 - 1.9585 ▲

GBP/NZD: 2.0350 - 2.05 ▲

GBP/CAD: 1.7050 - 1.7150 ▲