The pound fell to a 14-day low against the euro as it plummeted 1.4 percent during yesterday’s trading although has recovered slightly today, now trading at 1.1370. The crash in oil prices has spooked many investors and seen them sought the global safe-haven currency, the US dollar. Both the pound and euro lost ground to the US dollar, but it is the pound that has slipped the most.
Better than expected claimant data initially provided the UK currency with some support yesterday, but this was short lived, and as the market turned to “risk on,” the pound slumped. Chancellor, Rishi Sunak has introduced the Furlough scheme, in which the government would pay 80 per cent of an employee’s salary up the amount of £2,500 per month, but the scheme has come under fire for being insufficient to deal with the scale of the problem. 140,000 businesses applied within the first 24 hours, but it has not been easy to obtain, which casts doubt over the main intention of the scheme, which is for businesses to maintain their employees and not make redundancies.
Parliament has returned, albeit abiding by the social distancing measures, but is ready to scrutinize once again. Questions will be asked around Boris Johnson’s involvement in the early stages of the coronavirus crisis and the lack of planning to supply sufficient Personal Protective Equipment to the NHS and other healthcare workers.
UK Outlook All but Certain
UK coronavirus cases have now tipped 129,000 with a death toll of more than 17,000. The UK government is understood to be split on when and how to ease the current lockdown measures. There is a reluctance to lift the current restrictions too soon through fear of a second wave of coronavirus, but if restrictions are not eased soon, the UK economy could fall off a cliff.
Meanwhile, Brexit uncertainty is beginning to come back into the picture. Brexit negotiations have continued via video conferencing and reports suggest a constructive mood albeit with little detail. Chief EU Negotiator, Michel Barnier will hold a press conference on Friday, where he will provide an update on the talks. If the UK-EU fail to agree a trade deal, the UK would default to World Trade Organisation rules from February 2021. The UK has until June 30th to request an extension but whilst most expect the transition to be extended, Boris Johnson has repeatedly stated that this would not happen, whatever the circumstances, so investors are nervous, and this could see the pound trade lower.
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