- EUR/GBP taking up a bid in a continuation of bullish correction.
- EUR/GBP has added around 4.5% since last week despite COVID-19 spread in Europe.
- UK current account deficit is the largest in the G10 FX, a problem for GBP.
EUR/GBP is trading with a 0.9155 and 0.9387 range, currently oscillating in the higher end around 0.9321 as the euro firms, taking advantage of a slightly less prominent US dollar as the Federal Reserve floods the markets will USD in open-ended QE.
The US dollar, which has been the FX and money market’s go-to asset since the explosion of global COVID-19 pandemic cases over the past couple of weeks, has finally slowed down in its pace, giving back some ground to the euro and pound. The Fed’s latest action is explained here and how it impacts USD.
EUR/GBP bulls have fared better of late though, rallying from 0.8995 and scoring up around 4.5% on the bid to the aforementioned high as investors fear the worst for the UK economy given the government’s indecisive action plan to stave off a full-blown Italian style COVID-19 crisis.
Also, the UK current account deficit is the largest in the G10 FX space and has been a long-standing negative for GBP. Consequently, GBP/USD reached the lowest level since 1985 while the dollar funding squeeze turned the screw.
All eyes on government stimulus solutions
Markets will continue to monitor COVID19 developments and progress on rescue packages in Europan and the UK, but at this stage of the game, the Bank of England has some wiggle room left not much, and it really will be all down to the governments.