Sterling has risen against both the euro and the dollar benefitting from a drop in the euro and market risk.
Despite news of Prime Minister Boris Johnson’s being admitted to hospital for coronavirus symptoms, which initially hurt the pound, the British currency is now on the increase as the PM is recovering but also as risk appetite is on the surge.
The increase in risk appetite results from the slowing of the spread of the coronavirus in European countries, something that has impacted on the greenback which on Tuesday fell, while riskier currencies rose.
Boris Johnson’s Recovery
Yesterday, Chancellor Rishi Sunak had said that after two nights in intensive care, Prime Minister Boris Johnson was "improving" and "engaging positively" with medical staff at St Thomas' Hospital in London. The PM was taken to St Thomas' Hospital on Sunday after he tested positive for the virus and was moved to intensive care on Monday.
In the meantime, Sunak will be holding a Cobra meeting on Thursday to review the government’s approach to lockdown measures. Due to the coronavirus lockdown restrictions, the meeting will be held online via a conference call and will be attended by ministers and other top government officials.
Cobra stands for Cabinet Office Briefing Rooms and is usually held during national emergencies. In the past, Cobra meetings were held after 9/11 and 7/7 terror attacks, Lee Rigby's murder, 2001's foot and mouth outbreak and 2018’s Novichok attacks in Salisbury.
Today’s review will look at the need for restrictions, which were announced by Mr Johnson on 23 March. According to Sunak, “the review would happen ‘around’ the three-weeks point, which would be based on evidence that will ‘only be available next week’.” He added: "I think rather than speculate about the future, I think we should focus very seriously on the here and now and the present.”
Sterling’s rise comes as a result of a weak euro after the Eurozone’s failure to agree on a common approach to the economic impact of the coronavirus. It is understood that a joined fiscal response will effectively stop the collapse of the Eurozone’s economy. This is why, many European nations such as France and Italy have requested a “coronabond” in order to secure funding to help those European countries whose economies have been hit the hardest by the coronavirus epidemic.
The disagreement among European nations is intricately connected to the idea that a coronabond would mean managing the risk of all Eurozone states and would demand richer states such as Germany, Netherlands and Austria to fund it, an idea that they highly oppose to. It is this lack of agreement on how to support member states affected by the virus that is currently testing the strength of the euro.
As Pound Sterling Live reported, “The ability of global governments and monetary authorities to provide fiscal and monetary assistance to their respective economies at this time will ultimately limit the damage inflicted by the virus outbreak, as well as determine how quickly they recover. For markets, this will become a key differentiator between various currencies, with those underpinned by credible policy initiatives likely to outperform.”
To combat the effects of the coronavirus pandemic, today (9 April), the Bank of England has agreed to temporarily lend billions of pounds from its emergency overdraft to support businesses and workers.
The so-called “ways and means facility” will enable the government to access a large amount of funds in a short period of time to support the economy and pay for its stimulus programme, while minimising financial distraction.
In a joint statement, the Treasury and Bank said: "The government will continue to use the markets as its primary source of financing, and its response to Covid-19 will be fully funded by additional borrowing through normal debt management operations."
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