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Daily Update: Coronavirus Sparks Second Emergency Rate Cut from the BoE

Published: 19 Mar at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Russia,

Emergency BoE Rate Cut Buoys the Pound (GBP)

Sterling (GBP) plummeted against a handful of currencies earlier on Thursday as traders flocked to the safe-haven US Dollar. However, after the Bank of England (BoE) cut interest rates once again in the second emergency cut this month, GBP was able to claw back some of its losses.

Interest rates were cut to 0.1%, in the second emergency rate cut prompted by the worsening on the coronavirus pandemic. The BoE also announced another £200 billion in bond buying under quantitative easing.

The move provided the British currency with some support and according to Jeremy Thomson-Cook, chief economist at payments company Equals Group:

‘Sterling is higher on the day following the announcement having endured its fifth worst day of the century against the USD yesterday.’

Pound Euro (GBP/EUR) Exchange Rate Rebounds despite ECB’s Stimulus

Sterling (GBP) made significant gains against the Euro (EUR) on Thursday, leaving the pairing trading around 2% higher than Wednesday.

Demand for the US Dollar weighed on the single currency, causing the Euro to plummet to its lowest level in three years. Traders rushed to dump the Euro despite the fresh round of stimulus announced by the European Central Bank (ECB).

According to Ulrich Leuchtmann, head of FX and commodity research:

'There are still fears about refinancing of European debt in US Dollars. The swap facilities should normally give access to Euro funding. But I think this is not calming down the market. There’s a general assumption that there are a lot of US funding needs, not just in Europe but also around the world as a whole.’

Looking ahead, the single currency could continue to suffer losses against the Pound if traders continue to move away from the Euro.

Pound US Dollar (GBP/USD) Exchange Rate Rebounds as BoE Ease Policy

The Pound US Dollar (GBP/USD) exchange rate rebounded on Thursday after the BoE slashed rates. Before this, Sterling suffered as traders continued to drop Pounds in favour of the safe-haven Dollar as the coronavirus pandemic continued to spread.

Weak risk sentiment left the Dollar higher, and against a basketful of its rivals the currency was on its largest rising run since 1992. ‘Greenback’ demand remained strong despite further injections of liquidity into markets from central banks.

Looking ahead, it is likely the Dollar will extend its gains against the Pound as well as a basketful of currencies as investors continue to focus on the coronavirus pandemic and the economic outlook.

Pound Canadian Dollar (GBP/CAD) Exchange Rate Flat as Oil Prices Rise 3%

The Canadian Dollar (CAD) remained largely muted against the Pound (GBP) after the ‘Loonie’ received some support as oil prices rose nearly 3% on Thursday.

Prices began to recover after a three-day sell-off sparked by the coronavirus pandemic, and a market sell-off between Saudi Arabia and Russia which drove them to the lowest in close to twenty years. Oil prices edged higher as investors began to assess the impact of huge stimulus measures from central banks across the world.

Looking ahead to Friday, the ‘Loonie’ could edge up against the Pound following the release of higher than expected retail sales data.

Pound Australian Dollar (GBP/AUD) Exchange Rate Slumps as RBA Slash Rates

The Pound Australian Dollar (GBP/AUD) exchange rate traded lower, as the sell-off of the Pound continued and the Reserve Bank of Australia (RBA) slashed interest rates for the second time this month. The bank slashed rates to a record-low 0.25%.

The RBA also joined a growing number of central banks and promised to pump cash into the economy as the coronavirus pandemic hit businesses. Added to this, for the first time the bank announced a bond-buying programme.

Looking ahead, the ‘Aussie’ could suffer some losses as coronavirus remains the main catalyst for movement.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Falls despite Coronavirus Panic

The Pound (GBP) slumped against the New Zealand Dollar (NZD) on Thursday despite the Bank of England’s (BoE) emergency rate cut.

However, against other currencies such as the US Dollar, the ‘Kiwi’ slumped, losing as much as 5 cents against USD as investors moved away from riskier assets. The sell-off left the New Zealand Dollar at the lowest levels seen since the depths of the global financial crisis.

Looking ahead, the ‘Kiwi’ is likely to remain under pressure if traders continue to move away from riskier assets in favour of safe-haven currencies.

As of Thursday, 19th March 2020, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.0783, GBP USD exchange rate was 1.1492, GBP AUD exchange rate was 2.0016, GBP NZD exchange rate was 2.0224, GBP CAD exchange rate was 1.6664, and GBP RUB exchange rate was 90.9334.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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