Coronavirus Fears Impact The Markets

GBP rose by 0.5% against the USD yesterday reaching over 1.30 for a 1 week high, with the likelihood of a rate cut by The U.S. rising week by week.

The main factor has been increased fears of the true economic damage caused to The U.S. by The Coronavirus. Consumer confidence missing expectations is also a concern for the U.S. and will no doubt play a part in any rate decision.

With odds rising on a U.S. rate cut along with Consumer Confidence sliding, we could see some short-term USD weakness as investors will naturally look to CHF & GBP as safe haven.

Sterling also rose roughly 0.5% against the EUR, reaching levels of 1.1970 due to a fragile outlook for the European economy. Yesterday saw Germany’s final growth report for the 4th quarter stagnate at 0%. With further outbreaks in Italy yesterday, and the death total now at 11 there is a real fear that this outbreak could tip Europe over the edge and deep into a recession.

The Coronavirus now presents a bigger issue for the Euro as opposed to GBP.

Moving throughout the week, GBP movement will be driven by Brexit developments. Yesterday EU officials agreed to their mandate, warning Britain faced a tough road ahead.

Brussels mandate evolves around The UK signing up to a ‘level playing field’, essentially requesting The UK to continue to follow some of the bloc’s rules and standards.

After the release of The EU’s mandate, Number 10 accused Brussels of backing away from the terms of The Political Declaration which was agreed in 2019. The UK are set to release their mandate re-confirming their position of wanting a Canada/Australian style deal which has also been approved for America previously, on Thursday.

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