The pound managed to push past the 1.14 handle yesterday after a German court ruling declared that the ECB’s asset purchasing had to be proven necessary in the next three months. But with no major announcements today, investors remain focussed on Mr Johnson’s lockdown exit strategy which will be announced on Sunday. The Bank of England (BoE) is also set to make fresh policy decisions in a meeting tomorrow as it assesses the economic damage of the coronavirus pandemic.
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To soften the blow to the UK economy, the BoE announced a wide range of measures at the beginning of the crisis which included interest rates plunging to an all-time low of 0.1 percent.
Currently, experts are waging that no policy changes will be made but as the UK’s coronavirus death toll peaks to the highest in Europe, this could soon change.
The pound is currently trading at a rate of 1.1490 against the euro according to Bloomberg at the time of writing.
Michael Brown, Currency Expert at Caxton FX, spoke to Express.co.uk to provide exclusive insight into the current exchange rate.
He said: “Sterling gained ground against a weaker euro on Tuesday, breaking above the 1.14 handle, after a German court ruling on the legality of the ECB’s asset purchase programme left market participants somewhat doubtful over the central bank’s ability to continue providing a backstop to the eurozone debt markets.
“Today, one can expect relatively rangebound conditions, as investors look ahead to tomorrow’s BoE decision, and continue to await Prime Minister Johnson’s address laying out a ‘roadmap’ for exiting the lockdown.”
Chris Beauchamp, Chief Market Analyst at IG, a global leader in online trading said the German court’s ruling on the ECB had hit risk appetite in the markets.
He said: “It has been a volatile morning for European equities, as investors attempt to work out the implications of a German court decision.
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“Initial gains for European markets have been reversed as the German constitutional court throws a spanner in the works of the ECB’s monetary easing.
“As constitutional experts scramble to work out what the ECB will have to do in order to satisfy the hardliners in the German court, markets have seen a hit to risk appetite, as once again the potentially-fatal weakness of the eurozone system comes into play.
“Without a single authority to implement fiscal decisions, the nations of the eurozone must find common ground, making coherent and, importantly, rapid policy-making difficult at best.
“The decision was hardly unexpected, which accounts for the weakness in the euro before the decision this morning, but the cautious atmosphere in European assets could easily spread if investors fear that the co-ordinated global response to the pandemic is beginning to fray.
“Oil prices have continued their surge, with WTI pushing above $22 and providing further support for embattled oil stocks.
“This looks like an ongoing ‘reset’ in sentiment which ultimately leaves the general market outlook unchanged; everyone was clearly too bearish down at $10 and lower, but with the price up almost three-fold from its April low the polar opposite risk now looms – storage constrains and oversupply problems have not disappeared, while demand is only set to recover modestly.
“Buyers of oil now risk being very late to the party.
“Ahead of the open, we expect the Dow to start at 23,870, up 121 points from Tuesday’s close.”
Coronavirus cases have hit over 3.7million worldwide with almost 260,000 deaths.
The deadly virus is expected to have dealt a massive blow to the global economy.
The International Monetary Fund (IMF) predicted that the global economy is likely to shrink by three percent this year.
The IMF has described this as being the worst decline since the Great Depression of the 1930s.
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