The pound had a volatile trading session yesterday, moving in an almost 2-cent range against the greenback and 1.5-cents versus the single currency. 2 key developments stemmed from the UK yesterday; the Bank of England decided to implement an emergency interest rate cut while the government announced its latest budget.
The Bank decided to lower rates by the largest amount since 2009, taking emergency action for the first time since ‘08. The decision was unanimous and comes as fear from businesses and consumers is rising. The decrease takes the rate back to its record low of 0.25%, last seen in the aftermath of the EU referendum in 2016. The move should keep the pressure on the pound as its yield is significantly reduced. The government’s budget impressed many observers. A whopping £36-billion of fiscal stimulus is on offer with £12-billion aimed at addressing the covid-19 pandemic. Markets were indifferent to the budget. On the plus side, more investment to infrastructure and business support but on the flip-side, looser management of finances. Overnight, President Trump has announced a 30-day travel ban with Europe which does not include the UK. This has shaken markets that are heading into the European session down almost 5%. Today is all about the European Central Bank monetary policy announcement. No doubt the central bank will take action. How significant that action is will be what participants are incredibly eager to find out. The announcement will be made at 1245 with the press conference taking place at 1330.
8:33am, March 12th 2020
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