The Bank of England has just cut interest rates by 0.5% in an unscheduled move to counter the fallout from the coronavirus crisis.

Markets had already been pricing in around 0.38% cut from the BoE this month, so a fair amount of this was already priced in but it still puts Sterling on the back foot for now. In what appears be a co-ordinated move, this cut comes ahead of today’s first UK Budget from the new Chancellor, Rishi Sunak.

The Budget is usually a bit of a non-even for currency markets but this one should be much more important due to current events (Brexit, coronavirus and new tory majority). Traders are waiting to see how much extra spending the Tories will announce and how far they move away from austerity. Watch this space. The European Central Bank are expected to act tomorrow afternoon at their scheduled meeting. With interest rates already so low, there’s limited scope for what cuts the ECB can make and they’re expected to instead focus on providing extra liquidity to the sectors that need it.

As a result, the GBP/EUR rate had dropped nearly 1-cent following the announcement to around a 5-mth low but has recovered back some ground already. The GBP/USD also dropped around a cent and trades around a 1-week low.