Stocks Plummet And Sterling Under Pressure As We Close The Week

As the week draws to an end, fears amid the ever-growing number of Coronavirus cases continue to rise. With New Zealand, the Netherlands, Belarus, Nigeria and Lithuania confirming their first cases, markets around the world are taking huge hits. The Australian Securities Exchange finished yesterday down 3.3%, and other markets around Asia had similar losses. Similarly, US markets are continuing their negative trend as investors continue to adopt a risk off approach. Major US indices fell by over 4% yesterday, which is now over 10% down from recent highs. The impact on the global markets has triggered more and more companies to publish warnings and forecasters are updating their 2020 projections. The safe haven currency Japanese Yen continued its gains against the US Dollar yesterday having risen over 3% in the last 7-days. The World Health Organization has said that the outbreak is at a "decisive stage." The WHO may soon declare Covid-19 as a pandemic.

GBP/USD failed to capitalise on the gains from earlier this week as developments ahead of next weeks’ UK-EU trade talks saw the pair fall to fresh one-week lows, trading below 1.29 this morning. The UK’s mandate for the trade talks was published yesterday, the document outlines the countries key priorities and states that Boris Johnson could walk away from trade talks in June unless there is a “broad outline” of an agreement. The ever-deepening division between the UK and EU ahead of next week’s talks, the deadline for progress and threat to walk away weighed heavy on the pound. The losses were somewhat cushioned however as USD continues to be sold amid coronavirus fears. The poor condition of the US equity markets coupled with the speculation that the FED will cut interest rates to alleviate some of the impact of a spreading coronavirus. Meanwhile, the release of mostly in line US Q4 2019 GDP growth figures and better-than-expected US Durable Goods Orders data also did little to provide any respite to the USD sell off.

EUR/USD hit fresh 20-day highs yesterday, trading back above 1.10 as the EUR benefits from coronavirus uncertainty. Currently, the futures on the Dow Jones Industrial Average are reporting a 0.30% drop. The index fell by nearly 2,000 points on Thursday, confirming its worst four-day losing run since the 2008 financial crisis. Data out of the EU today is the German jobs data and preliminary Consumer Price Index for February. The US will be releasing the personal spending data for January.

GBP/EUR has seen losses yesterday as tensions rise in the build up to next weeks’ trade talks. Boris Johnson continues his hard-line stance against the EU, warning that the EU can begin planning for a ‘no deal’ Brexit from June if they fail to put in place a broad outline of a future relationship agreement by then. Johnson continued by rejecting EU demands for a ‘level playing field ‘commitment that would see UK policy, laws and regulations closet indexed to those of the EU in a range of areas. The EU insists those are necessary for there to be any preferential trade relationship with the UK. The market waits apprehensively for trade talks to commence next week, with the pair facing realistic concern about falling back to pre-Brexit levels of 1.1428 – not seen since October.

At the time of writing:

GBP/USD – 1.2874

GBP/EUR – 1.1673

EUR/USD – 1.1028

The figures are based on the live mid-market rate, correct as of 08:30 GMT on 28/02/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

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