The Pound to Euro (GBP/EUR) exchange rate was met by some dramatic swings in movement this week as currency markets where rocketed by heightened uncertainty regarding the coronavirus.
Sterling Touches New Decade Low in Highly Volatile Trade
The GBP/EUR exchange rate traded in a range of around five cents this week in skittish trade as the coronavirus crisis continued to unfold.
In the first half of the week criticism of the UK government’s handling of the crisis and concerns over the effectiveness of a £330bn stimulus package, resulted in the Pound falling off a cliff, suffering a 3% drop on Wednesday alone.
Sterling was able to reverse its fortunes in the latter half of the week however, after the Bank of England (BoE) slashed interest rates to a new record low and Chancellor Rishi Sunak prepared a new coronavirus stimulus package aimed at protecting jobs and wages.
Meanwhile, in spite of the EU taking the unprecedented step to close its borders the Euro was able to advance against the Pound through the first half of the week, aided by the announcement of a new €750bn quantitative easing programme from the European Central Bank (ECB).
But by the second half of the week it was the Euro’s turn to collapse, with the single currency shedding almost all of its gains for the session in the face of USD strengthen as well as growing fears about the deep recession facing the Eurozone.
Collapse in private sector growth to weigh on the Euro?
Looking ahead to next week’s session, the coronavirus will undoubtedly continue to dominate market sentiment, likely infusing the pairing with fresh volatility.
Moreover, with the publication of March’s preliminary PMI figures on Tuesday we will get our first indication how the coronavirus crisis is impacting economic activity.
This could prove particularly damaging to the Euro as the Eurozone PMIs are predicted to show a sharp contraction in both manufacturing and services as the bloc’s private sector ground to a halt this month due to quarantine measures put in place across Europe.
At the same time GBP investors will be keeping a close eye on coronavirus developments in the UK. Will the government follow its European neighbours in announcing more strict quarantine measures in the days to come?