RationalFX : Sterling climbed to three and a half year highs against EUR on Tuesday. Gains in GBP-EUR rate come from a combination of ongoing concerns that the coronavirus…..
will impact eurozone economy growth and the news that British Finance Minister, Rishi Sunak, will deliver the UK budget as planned at the beginning of next month.
Rishi Sunak, who took over from Sajid Javid last week, announced that he was ‘cracking on with preparations’ for the 11th March budget, amid concerns that the budget may be delayed.
GBP had initially opened the Tuesday session lower, following comments from the UK Chief Brexit Negotiator saying the UK would not be threatened into following EU rules to win a free trade agreement. By 2pm, the GBP-EUR had reached a high of 1.2069.
Unemployment data also played its part in moving sterling higher, as UK unemployment held at 3.8% – its lowest level since 1975.
The euro fell to it’s lowest level for 3 years against USD on Tuesday as odds of another ECB rate cut increased following the release of a German survey which showed investors losing confidence in the German economy.
Germany’s ZEW index fell sharply below expectations with the economic sentiment component reading 8.7, well below the 21.7 forecasted, and the current conditions component reading -15.7, below the -10.3 forecasted.
According to those that responded to the ZEW survey, the coronavirus is expected to have negative implications on global trade leading to weaker growth in Germany for the first quarter at least. This survey is concerning and follows the release of Destatis figures for Germany which showed the German economy stagnating in quarter 4 of 2019, before the Coronavirus had even threatened the economy.
As a result, markets are now expecting a 10 basis point cut from the ECB this year. The news resulted in the EUR-USD falling to a low of 1.0793.
09:30– GBP– Consumer Price Index (YoY); expected to rise to 1.6% from previous 1.3%.
19:00- USD- FOMC minutes.
Source : ETFWorld.co.uk