With Boris Johnson still hospitalised due to coronavirus, Dominic Rabb the Foreign Secretary has stepped up to act as interim Prime Minister and has delivered his first daily update on the Coronavirus pandemic with relative success. Now being forced to name Rishi Sunak as ‘next in command’ should Raab’s health deteriorate there is a risk to the pound in the short term that the UK could be left without an effective government should Covid-19 continue to sweep through the Cabinet. Seen as a very capable and respected leader, Johnson’s recovery is a real concern for the UK and the pound at this time.
UK Housing market feeling the strain
The UK housing market is already feeling the strain of the pandemic as the BBC report a drop of 70% in property transactions completing throughout March as the spread of the virus made moving impractical and then impossible.
The inevitable uncertainty with unemployment spreading through the UK is likely to have a more lasting impact on the property market as potential buyers lose confidence in their ability to commit to mortgage repayments and the banks are less inclined to lend despite record low interest rates. Knights Frank, a UK estate agent, are already predicting a drop of up to 3% on house prices through 2020.
EU failing to agree on aid package
The euro’s recent strength continues to be put in the firing line as the lack of action on its financial aid package to the eurozone places the single currency at risk of a sell-off. The coronavirus pandemic has exposed deep divides in Europe, with EU member states arguing over how to tackle the economic impact. Italy and Spain have accused northern nations – led by Germany and the Netherlands – of not doing enough whilst Spanish Prime Minister Pedro Sánchez has even warned that if the EU fails to come up with an appropriate plan to help member states with the financial burden of tackling the pandemic, the bloc could “fall apart”.
With their second attempt to reach an agreement failing yesterday a further meeting is now scheduled to continue discussions on Thursday.
Meanwhile, the European Commission has already turned its focus on how to unwind the bloc from current lockdown and social distancing measures. Commission President Ursula von der Leyen will host an ‘orientation debate’ to discuss this later today.
A lack of decisive action from the EU will be a threat to the euro’s value over coming days and weeks with government support being seen as key to the economic recovery from the virus. The Euro has already lost over 8 cents versus the Pound since March 19th and may struggle to maintain these levels without a clear action plan from its ministers.
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