Following the decision by the Bank of England to cut interest rates by 50 basis points to 0.25%, Chancellor Sunak delivered his first Budget which aimed to provide fiscal stimulus to complement the Bank of England’s stance of monetary easing.
Sunak announced a three-pronged approach aimed at helping the NHS, the general public and businesses which will inject £30bn into the economy. However, economic growth in the UK for the rest of the year has been downgraded from 1.4% to 1.1%. In addition, GDP data for the month of January was released at 0.0% suggesting that the economy has stagnated. Overall, the Pound has continued to weaken since yesterday. Today, Prime Minister Johnson has called an emergency Cobra meeting set for 1:15pm to discuss potentially upgrading the phase of the response to the coronavirus from ‘contain’ to ‘delay’ after the World Health Organization officially labelled the outbreak a pandemic.
The ECB will announce today whether or not they are going to follow other central banks by cutting interest rates. Some analysts are expecting a cut of 10 basis points to be announced whilst others believe that as interest rates are already at 0% in the Eurozone, cutting rates into the negative territory will have little effect and negatively impact the economy in the long-term. As a result, the Euro has lost ground against the Dollar. It has been reported that over half of all German companies have now been negatively affected by the coronavirus. Eurozone industrial production data is due at 10am, which will be closely watched by the market.
President Trump has suspended all travel to the US from all European countries except the UK and Ireland, with coronavirus cases in the US rising to over 1,000. Trump has reportedly asked US Treasury Secretary Mnuchin to apply pressure to Federal Reserve Chairman Powell to take further action to stimulate the economy. China’s commerce ministry has said that factory’s are now starting to recover as the country passes its peak of the coronavirus epidemic. The Dollar has recovered some of its recent losses against a weak Pound and Euro.