With the coronavirus locking down more nations with each week that passes by, the damage caused by the global slowdown in economic output is likely to be severe. Investors from both camps (GBP and EUR) will be keen to observe the impact of the virus on their respective data reports which are due throughout this week. The UK will see their labour market statistic which could lend Sterling some support if January’s unemployment rate remains at the current low, but earnings see an unexpected boost. Meanwhile for the euro, the release of ZEW’s German economic sentiment data could spell trouble on Tuesday, whilst Wednesday’s Eurozone Consumer Price Index (CPI) may shift the euro lower if consumer prices do not rise as high as expected in February.
Volatile week for GBP last week saw the currency dip and rise against EUR
GBP saw gains and losses through last week as fears concerning the coronavirus heightened which caused a further crash in the stock market. However, by the middle of the week, markets began to slowly stabilise as policymakers across the globe pledged to introduce a coordinated stimulus to help offset the global economic effects of the coronavirus. But GBP dipped once again as the Bank of England dropped their interest rates by 50bps on Wednesday, following suit of the US Fed Reserve. This lowered GBP, helping EUR edge over the British currency. Meanwhile, shortly after the rate cut, the UK government announced a £30 billion stimulus plan in response to the outbreak which helped lift GBP’s spirit. But the UK government’s announcement of moving into the ‘delay’ phase at the end of the week saw GBPEUR lose weight as the lack of strict measures imposed by the government disappointed markets and weighed heavy on the pound as fears about the spread of COVID-19 once again rose.
Economic activity to be scrutinised for evidence of coronavirus damage to economies
This week will see a range of data released for the UK and Eurozone. The UK will see labour market statistics which could help boost the currency if January’s unemployment rate remains at the record lows observed last month. GBP could also receive a lift if the UK government announce tighter policies on the containment of COVID-19 this week. Meanwhile, for the euro, it could see losses on Tuesday following the release of ZEW’s German economic sentiment data. If the spread of coronavirus has sent the sentiment in the bloc’s largest economy downwards, the euro will suffer. Added to this, Wednesday may not help EUR traders as the Eurozone’s Consumer Price Index (CPI) gets an unveiling. If consumer prices fail to rise as high as expected, then the single currency will remain under heavy pressure.
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