Pound Sterling US Dollar (GBP/USD) Exchange Rate Falls as Confidence Hit by Coronavirus Fears
The Pound Sterling US Dollar (GBP/USD) exchange rate slumped by around -0.8% this morning due to coronavirus fears. This left the pairing trading at around $1.2175.
Monday saw the Pound slump to its lowest level against the ‘Greenback’ since September as the UK increased its efforts to contain the coronavirus outbreak.
Sterling retreated as investors assessed the likely economic impact of the pandemic, which has rattled global markets. This also sent investors towards safer bets, such as the safe-haven US Dollar.
The Dollar benefitted today against riskier currencies as market confidence was hit by the Covid-19 pandemic.
Investors continued to remain nervous after coordinated moves from central banks had not calmed markets. This included another emergency rate cut from the US Federal Reserve.
Commenting on this, head of forex at State Street Bank, Kazushige Kaida noted:
‘Liquidity is even worse compared with yesterday. Even the gold has been sold sharply.
‘This is a world I have never seen before. This crisis is more incomprehensible than previous crises like the tech bubble burst [in 2000] and the LTCM crisis [in 1998].’
Sterling (GBP) Slides on Weak Employment Data
The Pound slipped as investors await for the government to announce additional help for businesses affected by the coronavirus outbreak.
Yesterday saw the government tell people to avoid pubs, clubs, restaurants, cinemas and theatres which increased the risk of companies suffering and potentially collapsing.
Director general of the British Chambers of Commerce, Adam Marshall has argued the government need to take further steps. Speaking to the BBC he stated:
‘Government has got to do more on the upfront costs facing businesses. Banks have got to do more to get support to the front line. And also I think the UK has to do more to coordinate a global economic response.’
However, weak unemployment data weighed on the currency as the country’s jobless rate increased to 3.9% before the impact of Covid-19. This was the highest rate of unemployment since August 2019.
Pound US Dollar Outlook: Will the Risk-Off Mood Continue to Weigh on GBP?
Looking ahead, the US Dollar (USD) could edge down slightly and be left flat against the Pound (GBP) following the release of US retail sales data.
If February’s retail sales do not rise as high as expected, and even stagnate, the Dollar could suffer some slight losses.
However, this could be offset by an increase in the risk-off mood amongst investors.
If risk appetite continues to decline as markets focus on the coronavirus outbreak, the safe-haven Dollar will continue to benefit. This will likely see the Pound US Dollar (GBP/USD) exchange rate continue to slide.