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Stocks crumble on coronavirus contagion

GBP - British Pound

Thursday was a miserable day for sterling as coronavirus driven stock market panic saw GBP/USD plummet mirroring stock markets around the world. In one of the biggest one day falls of recent times, cable fell from around 1.2850 at the start of the Asian session to briefly drop below 1.25 as markets took flight to safer assets. The catalyst for the circa 3% drop was President Donald Trump's decision to ban all flights from continental Europe from today in effort to control the coronavirus outbreak in America. Prime Minister, Boris Johnson announced yesterday the UK was moving from the "contain" to "delay" phase in its four step plan to try and prevent the UK from the worst of the outbreak. There are now 595 confirmed cases of the virus with 10 people now know to have died from the illness , all with underlying health problems.

The impact is looking more and more likely to impact UK sporting events like it has around the world with Chelsea's Callum Hudson-Odoi and Arsenal manager, Mikel Arteta both testing positive for the virus. The Premier League will meet later this morning with a postponement of fixtures looking likely copying action taken in Italy's Serie A.

GBP/USD has recouped some of its losses reclaiming the 1.26 handle this morning with GBP/EUR back up to 1.1260 jumping around 70 pips in early trade as some sort of market calm is restored this morning.

Key Movers

Both the UK and US stock markets suffered their worst falls since 1987 yesterday both dropping around 10% leading to US markets being temporarily being closed in New York for the second time this week. Soon after the bell rang in New York the market fell by 7% triggering the "circuit breaker" leading to a 15 minute pause in trading. It extended its losses however it didn't hit the 13% drop which would have signalled another 15 minute pause. European bourses didn't suffer any better with both France and Germany's main index's ending up more than 12% lower. Trump's flight embargo saw stocks in travel companies and airlines decline sharply. The move was not aided by the European Central Banks decision to keep rates unchanged despite promising to extend its Quantitative Easing program. Many were expecting a cut in either its main financing or its deposit rate to stimulate the economy however with rates already so low there is little wriggle room for the ECB to move.

Thankfully this morning some sort of calm appears to have been restored with China only reporting eight new cases of coronavirus overnight hopefully proving some sort of guide to how long this crisis will rumble on in the wider world. All Asian markets finished in the green and European stocks are all up too as the panic seen throughout the week eases. USD/JPY is up to 105.95 and EUR/USD trades at 1.12.

As well as football many other sporting events have been cancelled this weekend with the Australian Grand Prix, the US Player Championship gold among events to be cancelled. If there is another jump in infections the States or Europe then we could see another Monday morning stock crash however hopefully we are now out of the panic stage however UK government guidance that the peak of cases is still 10-14 weeks away does little to calm your nerves.

Expected Ranges

GBP/USD: 1.25 - 1.27 ▲

GBP/EUR: 1.1190 - 1.1360 ▲

GBP/AUD: 1.99 - 2.0150 ▲

GBP/NZD: 2.0410 - 2.0620 ▲

GBP/CAD: 1.7290 - 1.75 ▼