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Stocks plunge as Trump bans travel to US from Europe

GBP - British Pound

Yesterday saw new Chancellor of the Exchequer, Rishi Sunak unveil a raft of measures to fight the impact the coronavirus could have on the UK economy in his first UK budget. With many predicting a short but very sharp downturn in economic output on the back of the pandemic, Sunak announced £30b of spending to support businesses as well as employees forced to take time off work. Some of the more eye catching measures were suspending business rates for small companies, promising extra cash for the NHS and widening sick pay entitlement to those who are told to self-isolate. As well as these contingency measures the chancellor committed a massive extra £175b to infrastructure spending over the next five years.

The huge spending splurge has been made easier by UK government borrowing costs being close to an all time low (evidencing this, the yield on some Gilts turned negative for the first time ever during Monday's panic).

The measures implemented by Sunak as well as the earlier rate cut from the Bank of England appear to have been a coordinated effort to shield the UK economy as the number infected by Covid-19 escalates each day. As of Wednesday lunchtime, UK cases stood at 460 with six deaths. GBP/USD seems has drifted lower over the past couple of days with it now just under 1.28. GBP/EUR trades around 1.1350.

Key Movers

US President, Donald Trump has sent stock markets around the world tumbling overnight as he announced a 30 day travel ban on all flights arriving from continental Europe which will come into force this Friday. Britain is excluded from the ban as are US citizens, however they will have to pass a health check on arrival back in the States. In what was likely a move to try and calm markets the exact opposite was the outcome and European bourses are following Asia's lead posting huge losses again. US Dow futures are predicting similar losses again when they open at lunchtime and we could see "circuit breakers" stop trading should any of the benchmark indexes post a >7% drop. Another measure that will have done little to US sports fan morale is the announcement of the suspension of all NBA matches from Thursday after a Utah Jazz player tested positive for the virus.

The situation in Italy continues to deteriorate as the World Health Organisation officially recognised the outbreak of Covid-19 as being a pandemic. The mortality rate in Italy is of particular concern with 827 deaths from over 12k cases being reported meaning around 6-7% people who get the disease are succumbing to the virus. As previous reported all Series A matches has been cancelled and all shops with the exceptions of those that sell food and medicine have been asked to close their doors.

Today sees the European Central Bank announce it latest interest rate decision, with many expecting a slight drop in its deposit rate from -0.5% to -0.6%. Markets will be looking for what other measures ECB chief, Christine Lagarde takes in an effort to prop up the eurozone with many expecting an emergency liquidity package to be presented.

All of the above has meant as well as stocks being shunned, oil has been dumped, Brent trades at £33.8pb. Gold is creeping back up to $1700 and the Oz and the yen and swissy have made gains. We are experiencing market turbulence that is starting to resemble the darkest days of the global financial crisis. EUR/USD is at 1.1260 and USD/JPY back below 104.


Expected Ranges

GBP/USD: 1.27 - 1.2840 ▼

GBP/EUR: 1.1235 - 1.14 ▼

GBP/AUD: 1.9790 - 1.9980 ▲

GBP/NZD: 2.0375 - 2.0570 ▼

GBP/CAD: 1.7470 - 1.7650 ▼