UK Prime Minister Boris Johnson’s health continues to deteriorate as he battles with Coronavirus as news broke overnight that he has now been moved in to intensive care and is ‘very likely’ to need a ventilator over the coming hours and days to help him continue to fight Covid-19. Dominic Raab, the Foreign Secretary has now stepped up to lead the country through this crisis in the interim.
The Pound was initially pulled down on the news of the PM’s ailing health as investors see Boris Johnson as a competent leader to help the United Kingdom fight through this pandemic and do not wish to see a situation where this is not possible.
Calls for a tougher lockdown in the UK continue to sound as news outlets continue to flood our screens with images of too many people congregating in public spaces.
UK Housing Market Begins to Feel the Strain
A further challenge to Sterling is creeping up in the housing markets performance as the BBC has reported a drop of over 70% in the number of house transactions completing through March. House prices have also started to stagnate as the drop in demand begins to filter through to pricing and causes some concern over the resilience of the UK property market. Knight Frank a UK estate agent are predicting a drop of around 3% in house prices for 2020. This news has curbed the Pound versus Euro rate back from it’s recent 1.14 highs to trade more comfortably around 1.13 this afternoon.
Worrying Times for the European Banking Sector
Alarm bells are starting to sound over how well the banking sector in the EU will be able to cope with the increased pressure on the financial system from the current Covid-19 pandemic. As many businesses and individuals seek financial aid the European Central Bank has made it known that the Eurozone banking system entered the crisis in an already weakened state.
Bank profits within the EU were declining through 2019 for the first time in three years as bank profits were hit by a reduction in lending margins through a cut in interest rates to 0.5% and a slowdown in eurozone growth.
EU Finance Ministers Still at a Stand-Off
Discussions resume this afternoon between the 19 finance ministers of the single currency to attempt to make some decisions on its aid relief to member states as coronavirus continues to spread. The issue of common-debt or so called ‘corona bonds’ remains contentious with a split in appetite between those countries impacted significantly by the virus and those who are more fortunate. The history around mutualised debt from the 2008 financial crisis continues to haunt the debate.
As the EU fails to come to an agreement on how best to tackle the economic impact of coronavirus the economy continues to show signs of strain with manufacturing at a standstill. The euro’s recent resilience will be challenged if this delay continues and could see the Pound take full advantage over the days and weeks to come if the UK can continue to ‘keep calm and carry on.’
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