If anything could be said to have had done well in the past couple of weeks, the pound has. It recovered around 8% by Friday against the euro. Against the US dollar, although the gains from two weeks ago weren’t repeated last week, GBP/USD at least remained stable.
Sterling’s strengthening against the euro is largely due, apparently, to the currency markets being impressed by the swift and assertive action in the British chancellor’s stimulus package, compared to that of the European Central Bank. In the Eurozone, the usual north vs south divide is becoming a problem yet again. Calls for a “coronabond” to spread the risk and cost around the region are so far failing to persuade countries like Germany. One long-term fear for the single currency is that this could drive Italy further towards anti-EU sentiment.
Looking at currency charts makes a relatively pleasant change to coronavirus charts. Over the next couple of weeks though, if new cases begin to slow down, more and more countries will start planning for easing restrictions. It’s worth bearing in mind that some countries that locked down early, like Cyprus and Greece, appear to be barely affected by the virus.
Even so, we are probably only seeing the very beginning of Covid-19’s impacts, both long and short term. For the immediate future, the pound could weaken significantly, with some analysts even predicting parity with the euro over the coming weeks and months. If you have financial commitments abroad, especially in the Eurozone, please do consider locking in today’s rate with a forward contract.
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