The beginning of May has seen the pound slump against the euro below the €1.14 handle in a huge blow to the GBP. As tensions continue to escalate between the Trump administration and China over the origins of the coronavirus outbreak, investors have become rattled which has in turn soured the mood of the market. The pound is currently trading at a rate of 1.1375 against the euro according to Bloomberg at the time of writing.
He said: “Sterling struck a softer tone on Friday, dipping below the €1.14 handle once again, as risk sentiment broadly soured as investors closely monitored rising US-China tensions as a ‘blame game’ over the coronavirus outbreak begins.
“This week, the pandemic will remain front and centre, while investors will also digest the BoE’s latest policy decision and economic forecasts for further insight on how the UK economy will weather the coronavirus storm.”
US President Donald Trump held a virtual town hall meeting on Sunday at the Lincoln Memorial in Washington where he said that a report into the origins of the COVID-19 outbreak will reveal how China caused the pandemic.
“Trump’s calls for tariffs against China have hit market sentiment today.
“Meanwhile, airlines are under pressure as UK state aid seems somewhat lacking.
“Market sentiment has been dealt a blow as Donald Trump raised the likeliness of yet another significant breakdown in relations between the world’s two largest economies.
“Trump’s claim that the COVID-19 virus originated in a Wuhan lab could send shockwaves throughout the world if proven true.
“While the Australian PM has seen little evidence of such a move, there is a growing clamour for an inquiry which could drive a possible rift between China and the rest of the world if proven correct.
“The last thing markets want right now is another trade war with the world seemingly lurching from crisis to crisis over recent years.
“With Donald Trump threatening to impose fresh tariffs on China, we are seeing a fresh bout of weakness for the Chinese Yuan in response.”
Mr Mahony also said that airlines are also the main focus as they are forced to continue making cuts.
“Airlines have been in focus this morning, with some of the main players stating that they are receiving little by way of state air to help them continue operations.
“IAG (12,000) and Ryanair (3,000) job losses could be just the tip of the iceberg, with government support appearing to fall short compared with those on mainland Europe and the US.
“It seems airlines within the UK and Ireland could be dealt a harsher card compared with their mainland European and US counterparts, with Vueling, Iberia, Lufthansa, Air France and KLM all receiving the kind of state aid that doesn’t seem forthcoming for the likes of BA, EasyJet or Ryanair.
“Ahead of the open we expect the Dow Jones to open 434 points lower, at 23,912.”
Published at Mon, 04 May 2020 07:35:00 +0000