Pound to US Dollar Exchange Rate Tumbling despite UK Stimulus Measures
Following last week’s strong Pound Sterling to US Dollar (GBP/USD) exchange rate gains, the pair has essentially shed all of those gains this week. The US Dollar (USD) is benefitting a little from safe haven demand while the Pound (GBP) increasingly falls under coronavirus pressure.
GBP/USD jumped from 1.2819 to 1.3045 throughout last week, even briefly touching a monthly high of 1.3194 at the beginning of this week.
However, since touching that high, GBP/USD has been plummeting. GBP/USD continued to fall past last week’s lowest levels, trending near a low of 1.2739 at the time of writing today. This was the lowest level for the pair since October 2019 – four months ago.
The Pound continues to shed its recent strength today. Sterling tumbled even as the UK government and Bank of England (BoE) introduced fresh stimulus measures.
Pound (GBP) Exchange Rates Remains Unappealing as Stimulus Bounce Short-Lived
Yesterday saw the UK government hold its highly anticipated 2020 Budget presentation. As was widely hoped, the government ramped up fiscal stimulus in hopes to keep the economy resilient amid the outbreak of coronavirus Covid-19.
On top of this, the Bank of England (BoE) announced an emergency interest rate cut of 50 basis points. The double-barrelled coordinated stimulus announcements briefly led to stronger Pound demand.
However, the Pound’s appeal didn’t last. As the World Health Organisation (WHO) is now calling the virus a pandemic, market risk-aversion has intensified.
Concerns over the measures the UK government will take to limit Covid-19’s spread are making the Pound vulnerable to risk-sentiment. According to Yohay Elam, Analyst at FXStreet:
‘According to reports, the Cobra panel will announce a move from the ‘contain’ phase to the ‘delay’ one, limiting gatherings.
Broader markets are struggling after US President Donald Trump failed to impress the public and investors by announcing limited measures to help employees while banning flights to and from Europe – excluding the UK.’
US Dollar (USD) Exchange Rates Benefitting from Safe Haven Demand but Gains Limited
Following its broadly bearish movement last week, the US Dollar has been a little stronger this week. Still a safe haven currency despite falling against other safe havens, the US Dollar has recovered against the jittery Pound.
The US Dollar has had a mixed reaction overall from the outbreak of coronavirus Covid-19.
The US Dollar is typically a safe haven that would benefit from market panic, but surging Federal Reserve interest rate cut bets have dominated the US Dollar outlook.
On top of lingering Federal Reserve interest rate cut bets, the US Dollar is being pressured by a travel ban announced by US President Donald Trump.
The travel ban was perceived as likely to disrupt the global economy, and economists were concerned that the US government hadn’t done more in the way of fiscal stimulus or plans to fight the pandemic.
Pound to US Dollar (GBP/USD) Exchange Rate Outlook Remains Dominated by Coronavirus
Even though investors hoped for more stimulus from the US government, the Pound continues to fall against the US Dollar amid the market’s demand for safer investments.
Concerns over the coronavirus pandemic are likely to keep dominating the market outlook for some time to come.
The Pound is unlikely to strengthen much unless investors are impressed with the UK government’s measures to limit the economic damage of the virus.
This could make it easy for the US Dollar to keep climbing and pushing the GBP/USD outlook lower.
The US Dollar is will likely continue to benefit from safe haven demand, though it may weaken if Federal Reserve rate cut speculation flares up and takes focus again.
Data due for publication tomorrow is likely to be overshadowed. Instead, developments regarding the coronavirus pandemic and how governments are handling it will remain the focus for the Pound to US Dollar (GBP/USD) exchange rate outlook.