The Sterling recovered after Bank of England surprisingly cut interest rates, following other central banks around the world trying to limit the COVID economic damage so far.
With the virus spreading around the globe, central banks along with governments are under pressure to support growth. The coronavirus outbreak has sent stock markets into a tailspin as investors head for the safety of government bonds.
Τhe BoE’s cut its benchmark rate by 50 basis points, to 0.25%. The BoE rate cut follows similar moves by U.S. and Canadian central banks and puts more pressure on the ECB to act, although it has limited room with rates already negative.
Sterling initially fell as much as 0.4% against the dollar and 1.2% against the euro. But the pound rebounded as the move – including actions to support bank borrowing – reassured some investors. The pound rose to $1.2918, up 0.3% on the day.
Against the euro, the pound was last up a third of a percent at 87.74 pence per euro.
Britain’s finance minister, Rishi Sunak, is expected to direct further firepower at the British economy in his first budget.
Investors hoped global monetary policymakers would offer further stimulus to offset trade and travel disruptions. But lack of clarity on what Washington will do has kept many investors on guard.
U.S. President Donald Trump said on Tuesday he would ask Congress for a payroll tax cut and other “very major” stimulus moves, but the details remain unclear.
START TRADINGForex – Sterling recovered after surprise BoE rate cut
Policymakers and central banks have been taking measures to bolster their economies against disruption caused by the coronavirus outbreak. The latest was the Bank of England which moved to surprise cut of interest rates by half a percent. Money markets are fully pricing in a further 10 basis-point cut by the European Central Bank when it meets on Thursday.
The dollar was down particularly sharply against the safe-haven Japanese yen and Swiss franc.
The greenback lost 0.7% to 104.90 yen, falling more than a full yen from Tuesday’s high of 105.915. The U.S. currency had fallen as low as 101.18 on Monday. While Japan may already be in recession, its currency usually rises at times of market stress because of the country’s current account surplus and its net creditor status.
The Swiss franc gained 0.6% to 0.9346 franc per dollar.
The euro also rose 0.5% to $1.13360.
In commodity markets, oil prices fell after Saudi Arabia and the United Arab Emirates announced plans to boost production capacity. OPEC and the U.S. Energy Information Administration (EIA) cut oil demand forecasts because of the coronavirus outbreak.
Brent crude was down $1.03, or almost 2.8%, at $36.19 per barrel by 1355 GMT. WTI crude was off 99 cents or 2.9% at $33.37.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money