Pound to US Dollar Exchange Rate Recovers Half of Weekly Losses
Update 15:17 GMT 20/03/2020:
The Pound to US Dollar (GBP/USD) exchange rate continues to climb today, on track to advance around two cents.
While GBP/USD is struggling to hold today’s highs, it currently trends near the level of 1.1880 as the Pound (GBP) rebound continues.
Investors are still buying the Pound from its cheapest levels and selling the US Dollar (USD) from its highs. It is due to a mixture of profit-taking and markets rebounding from the shocking movements seen earlier in the week.
The US Dollar remains appealing though, which is limiting GBP/USD’s potential for gains. Continued fiscal measures from the US government to support jobs and workers are keeping the currency from falling too far from highs.
(Originally published 9:27 GMT 20/03/2020)
Pound to US Dollar Exchange Rate Advancing on Bank of England (BoE) News
The Pound to US Dollar (GBP/USD) exchange rate has seen significant but volatile movement this week. The US Dollar (USD) saw significant surges, pushing the pair to new lows, but the pair has been recovering slightly since yesterday.
Since opening this week at the level of 1.2269, GBP/USD has been trending lower The pair has shed around four cents.
Lows deepening throughout the week, GBP/USD bottomed out for now at the level of 1.1420 yesterday. This was the worst level for the pair in over three decades, since 1985.
After touching that low, investors began buying the Pound (GBP) back from its worst levels. The rebound continues today and at the time of writing GBP/USD is trending near the level of 1.1860.
The Pound outlook remains gloomy though. Meanwhile the US Dollar outlook seems likely to keep benefitting from market safe haven demand going forward.
Pound (GBP) Exchange Rates Find Support in Bank of England (BoE) Stimulus
After plunging for days on worsening coronavirus fears, the Pound finally found some fresh support yesterday. In an emergency announcement, the Bank of England (BoE) announced fresh policy stimulus.
The Bank of England cut UK interest rates to 0.1% and announced that it was expanding its quantitative easing (QE) scheme.
Markets saw the stimulus move as a huge one. The news impressed investors so much that it caused the Pound to rebound slightly from lows.
This, combined with other stimulus action across the globe yesterday, helped market sentiment slightly overall. According to Haresh Menghani from FXStreet:
‘The BoE move led to a modest recovery in the global risk sentiment and prompted some USD profit-taking, helping the pair (GBP/USD) to gain some positive traction during the Asian session on Friday.’
US Dollar (USD) Exchange Rate Rally Softens but Currency Sees Hugely Positive Week
As the coronavirus pandemic worsens across the globe, investors had been piling into safe haven assets. The safe haven US Dollar has been among the strongest benefactors of this movement this week, rocketing higher across the board.
Since last night, the US Dollar’s rally has paused. Some investors are selling the currency back from its highest levels in profit-taking.
Despite this though, the US currency is still on track for its strongest week since 2008.
Not only a safe haven, the US Dollar is also popular as a funding currency for its liquidity. Investors are frantically rushing to cash for security. According to Stuart Oakley from Nomura:
‘People are selling everything and the common thread is they just want cash,
People just want cash because at the end of the day, people don’t know where their next revenue is coming from and they’ve got payments to meet. I don’t think that’s going to change.’
Pound to US Dollar (GBP/USD) Exchange Rate Rebound Could be Short-Lived
The Pound is climbing back from its worst levels and the US Dollar is dipping from its highs. However, the outlook for the Pound to US Dollar exchange rate remains weak.
Sterling may cool from its shocking losses, particularly if UK stimulus is ramped up. Pound investors will be closely watching the government and Bank of England (BoE) for further stimulus.
In particular, the UK government is expected to ramp up its fiscal stimulus plans for workers. UK Chancellor RIshi Sunak is reportedly preparing a new package to protect jobs.
Even if the Pound experiences slightly steadier or stronger demand though, it may struggle to sustain gains against a bullish and appealing US Dollar.
According to Haresh Menghani from FXStreet:
‘Any subsequent recovery in the GBP/USD pair might still be seen as a selling opportunity and remain capped.
The overnight swing high, around the 1.1700 round-figure mark, now seems to act as immediate resistance.’
If the US Dollar remains appealing on safe haven demand, the Pound to US Dollar (GBP/USD) exchange rate could begin to slide again if the coronavirus outlook takes another turn for the worse.