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Pound to Euro Exchange Rate Climbs Back Above €1.15 as Italy Takes Drastic Measures to Combat the Coronavirus

Euro Currency Forecast

GBP/EUR Exchange Rate Consolidates Gains after Italy Shuts Schools

The Pound Euro (GBP/EUR) exchange rate is on solid footing this morning, with the pairing consolidating Wednesday’s gains after EUR investors were spooked by Italy’s decision to shut its schools in an effort to combat the spread of the coronavirus.

At the time of writing the GBP/EUR exchange rate is trading slightly higher at €1.1568 this morning, having rallied roughly a cent on Wednesday.

Mounting Pressures of Coronavirus Weigh on the Euro (EUR)

The Euro (EUR) is looking increasingly vulnerable to losses this week as the economic risks posed to the Eurozone by the coronavirus become increasingly clear.

This comes as Italy, the epicentre of Europe’s coronavirus outbreak, has taken drastic steps in an attempt to limit the spread of the disease. Announcing on Wednesday it would be shutting all schools and restricting public events for at least 10 days.

The disruption caused by the move will undoubtedly hurt Italy’s already weak economy, and is all but certain to tip Europe’s third largest economy into a recession this year.

EUR investors are also aware that the wider Eurozone is also far from immune from the economic impact of the coronavirus, driving speculation that the European Central Bank (ECB) is preparing to respond with a possible rate cut of 10 basis points next week.

Pound (GBP) Buoyed as BoE Rate Cut Speculation Eases

Meanwhile, the Pound (GBP) remains supported this morning as expectations for an immediate rate cut from the Bank of England (BoE) eased.

There had previously been some speculation the BoE could follow the Federal Reserve’s lead in announcing an emergency rate cut this week, in an effort to limit the economic impact of the coronavirus.

However incoming BoE Governor, Andrew Bailey cast doubts on the prospect of the bank cutting rates before its next monetary policy meeting.

Speaking before the UK’s Treasury Committee on Wednesday, Bailey said:

‘What we need is frankly more evidence than we have at the moment as to how this is feeding through.

‘We are still looking at the evidence and the precise sort of balance of what the shock is likely to be.’

GBP investors will look to current BoE Governor Mark Carney to shed more light on the bank’s position on policy when he speaks later this afternoon.