The pound to euro exchange rate faced pressure yesterday as the trading week got well underway. GBP slumped back to a near four-month low against the euro while a “steady grind lower” took place throughout the day ahead of today’s budget. This was followed by a further “knee-jerk” drop following the interest rate cut this morning.
- Coronavirus flights: Norwegian air cancels 3,000 flights
Chancellor Rishi Sunak will deliver the budget after Prime Minister’s questions this afternoon.
The Budget, or Financial Statement, is a statement made to the House of Commons by the Chancellor on the nation’s finances and the Government’s proposals for changes to taxation.
Sunak will commit to the biggest increase in spending on capital – roads, rail, research – in generations.
Also today, policymakers reduced interest rates to 0.25 percent from 0.75 percent, taking borrowing costs back down to the lowest level in history.
The move is a desperate attempt to add stability to the economy amid coronavirus fears.
Coronavirus continues to impact the economy as flights are axed and Italy goes into lockdown.
There are currently 119,132 cases confirmed worldwide and 4,284. In the UK, there have been 382 cases and six deaths.
The pound is currently trading at 1.1365 against the euro, according to Bloomberg at the time of writing.
Michael Brown, currency expert at international payments and foreign exchange firm Caxton FX, spoke to Express.co.uk regarding the latest exchange rate figures.
“Sterling was pressured on Tuesday, falling back to near four-month lows against the euro,” said Brown.
“[This came] as some pre-budget jitters crept into the pound’s trade, resulting in a steady grind lower throughout the day.
“Today, the aforementioned budget will be in focus, as investors look for Chancellor Rishi Sunak to deliver a significant degree of fiscal stimulus, including targeted measures to help the economy through the coronavirus epidemic.
Commenting on the interest rate cut, Brown said: “After the Fed’s emergency rate cut last week, and ahead of the Budget this lunchtime, the Bank of England have surprised markets this morning by announcing a 50bps rate cut, in an attempt to cushion the economic blow of the coronavirus.
“While blanket rate cuts are unlikely to be the only solution to the economic fallout of the virus, the announcement of a term lending scheme for SMEs shows the Bank are also putting in place targeted measures to help those in the economy who will need it most.
“Sterling took a knee-jerk leg lower after the decision, though has pared some losses, largely due to around 45bps of easing having already been priced in for the scheduled March meeting.
“Attention now turns to the Budget – this lunchtime – where a significant degree of fiscal stimulus is set to be announced. Markets will also be paying close attention to further communications from the BoE to assess the likelihood of further policy easing. “
- Coronavirus travel: Britons continue to book holidays despite virus
George Vessey, Currency Strategist at Western Union, commented ahead of the budget: “Amidst an ultra-uncertain economic environment, UK chancellor, Rishi Sunak, will likely hold back from ambitious spending decisions in his upcoming Budget statement.
“The pound rallied in January after Mr Sunak was appointed on expectations of looser fiscal stimulus.
“However, the main topic is now likely to be how to limit the economic impact of coronavirus.
“For example, the Treasury is expected to provide extra cash for the health service as pressure is expected to build as the virus spreads.
“Support to small businesses is also expected on anticipation of a spike in staff absences. Sterling could gain though if Mr Sunak also decides to relax a limit on daily spending enforced by his predecessor Sajid Javid.
“Furthermore, hints of lower rates of tax could also help the pound climb. A fiscal boost should help relieve some pressure off the Bank of England to cut interest rates to help safeguard the UK economy from coronavirus-induced economic implications.”
So what does this all mean for Britons heading off on holidays and looking to buy travel money?
The Post Office is currently offering a rate of €1.0987 for over £400 and €1.1228 for over £1,000.
Source: Read Full Article