GBP/USD Exchange Rate Buoyed by Fed Rate Cut Speculation
The Pound US Dollar (GBP/USD) exchange rate is trending higher this morning as coronavirus virus concerns drive Federal Reserve rate cut expectations.
At the time of writing the GBP/USD exchange rate is trading at around $1.3014, up roughly 0.5% from this morning’s opening levels.
US Dollar (USD) Slumps, Fed to Target another Rate Cut this Month?
The US Dollar (USD) is striking lower this morning as expectations that the Federal Reserve could target additional rate cuts this month.
Fed announced an emergency rate cut of 50 basis points earlier this week in an attempts to limit the impact of the coronavirus on the US economy.
However markets believe that the Fed may not be done just yet as the US states begin to declare emergencies over local outbreaks of the coronavirus.
In announcing the cut on Tuesday the Fed said:
‘The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.’
According to CME Group’s FedWatch tool markets are now pricing in a 63% chance that the Fed will announce a cut of 75 basis points when the bank holds its next monetary policy meeting on 18 March.
How Will the UK’s Budget Impact the Pound (GBP) Next Week?
While the coronavirus will continue to dominate headlines next week, for GBP investors the focus is likely to be on the publication of the UK’s Budget.
Expectations for the Budget are high following as sudden resignation of Sajid Javid as Chancellor and his subsequent replacement by Rishi Sunak fueled hopes of a bumper increase in government spending as Boris Johnson seeks to ‘level up’ the UK.
However since then we have seen the coronavirus outbreak grow to pandemic levels and this will undoubtedly need to be addressed in Sunak’s budget.
This could weigh on the Pound (GBP) through next week’s session if it results in a more conservative budget, with the government putting a pin in some of its spending plans as it sets aside more funds for dealing with a large-scale outbreak of the disease.