In the early hours of this morning, the Federal Bank in America took historic action to slash interest rates to 0%, setting the scene for one of the most volatile trading periods since the 2008 financial crisis. At the same time as dropping rates to flat, the Fed also announced a huge $700bn quantitative easing scheme aimed to prop up the sliding markets and avoid the ‘Credit crunch’ of 2009, where beleaguered banks refused to loan funds to each other and consumers.
Whilst it remains to be seen at US open this afternoon how the markets react to this course of action; on this side of the Atlantic, the dust had barely settled on one of the worst days of GBP trading in recent memory. As the Government announced further containment measures and coronavirus cases began to rise, the pound slid -2.85% against the dollar and -2.25% against the euro. Whilst the continuing impact on GBP can be attributed to coronavirus, it is important to keep in mind, that issues surrounding Britain’s trading relationship with the EU and possible further Bank of England rate cuts on or before the 26th of March meeting are now being magnified.
At trading open this morning, the pound has attempted a fightback against the crippling dollar losses from Friday but is still losing ground against the Euro. It is also critical to note, that clients who have or are considering purchasing forward contracts will be impacted by Central bank interest changes – contact your account manager today to discuss the impact on your bottom line at your earliest opportunity.
Have a great day,
Joshua Haden-Jones, Senior Relationship Manager