The pound to euro exchange rate plummeted again on Wednesday for a third consecutive day. The pound has now dropped below the 1.12 handle against the euro – a startling low compared to Tuesday’s 1.13 handle. There have been more than 4.4 million cases of coronavirus worldwide and almost 300,000 deaths.
The UK has the fourth worst case rate in the world with more than 229,000 cases and over 33,000 deaths.
But there was welcome news yesterday when the Bank of England’s (BoE) Governor Andrew Bailey said that they can help spread the cost of coronavirus over society over time.
He told ITV yesterday: “What we can do, providing the overall credibility of the framework remains in place – and (BoE) independence is very important to that – is that we can help to spread over time the cost of this thing to society.
He added: “That, to me, is important.
“As a result of these headwinds, the pound skidded to a five-week low against the common currency, holding just above the 1.1250 mark.
“Today, the pandemic will remain at the forefront of market participants’ minds, with sentiment remaining shaky amid fears of a second wave of infections, and rising US-China tensions.”
Senior Market Analyst at IG Joshua Mahony gave his commentary on the latest UK GDP figures which he suggested did little “to lift sterling”.
“Better-than-expected UK data has done little to lift sterling, with Q2 figures likely to be significantly worse,” he said.
“Meanwhile, lockdown easing could come to the detriment of market sentiment if Covid-19 cases rise once more.
“UK growth data outperformed market expectations this morning, yet optimism has been fleeting at best for the pound.
“First quarter growth data was always going to be somewhat mixed given that the virus only really took hold throughout March.
“Thus, the March reading of -5.8 percent highlights just how rapid the UK economy has been contracting since lockdown measures were put in place.
“With measures to restrict movement only coming midway through March in the UK, there is plenty of pessimism over exactly how things look for Q2 and particularly April.
“From an economic standpoint, the delay in UK COVID-19 experiences means that we could see the timelines laid out by Johnson pushed back as lessons are learnt from those countries which ease lockdowns too much or too soon.
“2020 will be the year that truly heralds the dominance of the digital age, with the Nasdaq outperformance highlighting the feeling that business practices will become increasingly online even once the virus subsides.
“The impending easing of lockdown restrictions is starting to raise fear for markets despite previous hope that this would herald a new, more bullish phase for economic activity.
“Comments from Dr Fauci yesterday highlighted the fear for scientists that the US may be seeking to reopen too early, and the huge disparity between US states will provide us with a good idea of exactly the impact of easing too early.
“California is extending their lockdown restrictions by another three months, whereas Georgia is planning to open bars and restaurants by the end of May.
“It seems wholly likely that the current desire to reengage in economic activity will ultimately provide a significant spike in the R rate, highlighting the fact that authorities will ultimately have to choose between health and economic growth.”
Published at Thu, 14 May 2020 06:30:00 +0000