RationalFX : Sterling saw its biggest daily gain against the euro on Friday since the general election due to the appointment of new Chancellor Rishi Sunak…..
The pound strengthened due to the belief that Sunak will take a more liberal stance with his spending plans in order to boost the economy. Many believe that a more fiscal approach is needed to combat poor economic growth faced by the UK after Brexit and by increasing government spending this could be a way growth could increase.
Sunak coming in as the new Chancellor opens doors for more public spending at March’s budget announcement. Sterling could see more upside and rise above 1.21 against the euro as chances of a rate cut have diminished. Furthermore, sterling rose back above 1.30 against the US dollar after the appointment of Sunak and rose more than 1% against all majors.
The euro fell to its lowest levels in two and a half years against the US dollar on Friday, due to a combination of fears of the coronavirus impacting the eurozone and poor economic data. The euro fell to 1.0826 against the dollar, its lowest level since May 2017. Eurozone’s GDP grew by 0.1% quarter on quarter in Q4 in line with forecasts, but it’s year on year growth was weaker than expected at 0.9%.
Furthermore Germany, the eurozone’s biggest economy, stagnated in Q4 due to weak private consumption and state spending. This has brought back fears that Germany could be heading for a recession as they look to replace Angela Merkel.
Source : ETFWorld.co.uk