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GBP/USD Exchange Rate Steady as Federal Reserve Slashes US Interest Rates to Near Zero

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GBP/USD Exchange Rate Stable as Fed Acts to Limit Economic Impact of Coronavirus

The Pound US Dollar (GBP/USD) exchange rate is currently trading in a narrow range this morning after the Federal Reserve surprised markets by announcing a second emergency rate cut.

At the time of writing the GBP/USD exchange rate is trading at around $1.2297, virtually unchanged from this morning’s opening levels.

US Dollar (USD) Undermined by Fed’s Second Emergency Rate Cut

The US Dollar (USD) opens this week on the back foot, following the Federal Reserve’s shock announcement of a second emergency rate cut in as many weeks.

In light of growing concerns over the economic impact of the coronavirus, the Fed announced it would slashing US interest rates to near zero, deploying its largest rate cut since the 2008 financial crisis.

On top of this the Fed also reintroduced its quantitative easing programme, announcing it would purchase $700bn in Treasury and mortgage-backed securities.

A statement released by the Fed said:

‘The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States.

‘The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses.’

Fed Chair Jerome Powell warns he expects the coronavirus to have a ‘significant economic effect’ in the near-term and that the longer-term economic implications are ‘highly uncertain and, I would say, in fact, unknowable’.

Pound (GBP) Capped, UK Government’s Coronavirus Approach Under Fire

Meanwhile, the Pound (GBP) is struggling to capitalise on the US Dollar’s (USD) weakness this morning as investors express their concern about the UK government’s approach to containing the coronavirus.

Unlike most of its European neighbours, the UK is yet to implement any kind of social distancing measures, with schools still open and no restrictions on public gatherings.

The government appears to be consigned to the fact that a significant portion of the population will contract the disease and has stated is now aiming to achieve herd immunity.

The UK government’s approach appears to be in direct contradiction with the advice being given by the World Health Organisation (WHO).

In an effort to reassure the public Boris Johnson has announced he will be holding daily conferences to update on coronavirus situation, however this appears to have done little to reassure GBP investors.