FTSE 100 rebounds following BoE comments

The FTSE 100 initially rebounded 2.6% this morning as the Bank of England said that it will protect the UK’s economy from the coronavirus outbreak. The BoE said that they would ‘take all necessary steps’ to ensure the stability of the British economy, the strong words have given the equity markets much needed impetus following the worst sell off since 2008 where £4.7 trillion was wiped off global markets in one week. It will be interesting to see what stimulus the central bank will employ given rates are already at historic lows. The pound was under pressure throughout the back end of last week as investors began to price in a tense period of negotiation with the EU and news that PM’s promises from the manifesto cannot be supported without further tax spending.

In the near-term, major currency movement is likely to be dictated to by monetary policy, comments from the Bank of England will be closely watched with the purpose of finding out what ‘necessary steps’ may be taken to support the UK economy. Secondly, and most importantly, markets will be closely watching the spread of the coronavirus. The disease looks to have spread across the majority of European nations and with prominent events such as the Geneva motor show and Basel world already cancelled, how long before the majority of major trade routes are disrupted?

Currency-wise, after a period of low volatility we are now seeing movement in the major currencies, GBPEUR is trading just above 1.15 having spent the majority of the last month near the 1.20 handle. That is a drop of 4.3% in a week. Equally EURUSD is just below 1.11 having hit 36 month lows of 1.0750 in mid-February. It looks as though volatility is back with vengeance in all financial markets.

GBPUSD - 1.2769

GBPEUR - 1.1535

EURUSD - 1.1067

The figures are based on the live mid-market rate, correct as of 08:30 GMT on 02/03/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

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