2020.03.0211:47:00UTC+00Pound Weakens As BoE Vows Stimulus To Ease Virus Impact

The pound drifted lower against its major opponents during the European session on Monday, as the Bank of England vowed to take necessary steps to protect the economy from the virus outbreak.

The BoE promised that it would ensure financial and monetary stability of the economy in the wake of the coronavirus outbreak.

The Bank would monitor developments and is evaluating its consequences on the global and UK economies and financial systems, according to a spokesperson of the bank.

This followed indications from policy makers of the Bank of Japan and the Federal Reserve to act to support their economies.

The U.S. Federal Reserve is expected to cut interest rates when it meets on March 18.

In a rare emergency statement, Bank of Japan Governor Haruhiko Kuroda said the central bank would take necessary steps to help protect markets from the impact of the coronavirus.

Survey data from IHS Markit showed that the UK manufacturing sector expanded at the fastest pace in ten months in February as domestic demand continued to recover on the back of reduced political uncertainty.

The IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose to 51.7 in February from 50.0 in January. However, this was below the earlier flash estimate of 51.9.

Data from the Bank of England showed that mortgage approvals for house purchase increased to the highest level in nearly four years in January.

The mortgage approvals rose to 70,888 in January from 67,930 in December. This was the highest since February 2016 and above economists' forecast of 68,000.

The pound declined to 1.2752 against the greenback, from a high of 1.2851 set at 1:30 am ET. If the pound drops again, 1.25 is likely seen as its next support level.

Extending early decline, the pound touched 137.15 versus the yen, its lowest level since October 15, 2019. The next likely support for the pound is located around the 135.00 level.

Bank of Japan Governor Haruhiko Kuroda said the bank will ensure stability in the financial markets via asset purchases.

"The Bank of Japan will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases," he said in a statement.

The pound fell the most since October 10, 2019 against the franc, at 1.2223. The pound is likely to face support near the 1.20 mark.

The pound depreciated to a 4-1/2-month low of 0.8704 against the euro, from Friday's closing value of 0.8599. Further decline in the pound may find support near the 0.90 mark.

Final survey data from IHS Markit showed that Eurozone manufacturing activity contracted only marginally and at the slowest pace for the past year in February.

The factory Purchasing Managers' Index rose to 49.2 in February from 47.9 in January. This was slightly above the flash score of 49.1.

Looking ahead, U.S. ISM manufacturing index for February and construction spending for January are set for release in the New York session.