GBP/USD Exchange Rate Sinks as Trump Signs Fed Stimulus into Law
The Pound to US Dollar (GBP/USD) exchange rate fell by -0.5% today after Friday saw US President Donald Trump sign into law the Federal Reserve’s massive $2 trillion stimulus programme, effectively boosting the safe-haven appeal of the ‘Greenback’. The pairing is currently trading around $1.238.
Kevin McCarthy, a minority member of the US House of Representatives, commented on the bill:
‘This bill is not only a rescue package, it’s a commitment — a commitment that your government, and the people whom you elected to serve you, will do everything we can to limit the harm and hardship you face, both now and in the foreseeable future.’
The US Dollar (USD) was also boosted by today’s release of February’s US pending home sales, which beat forecasts and rose by 2.4% despite a predicted drop by 1%.
However, despite the 13-month high last month, ‘Greenback’ investors are remaining cautious as the data represents a time before the coronavirus took hold of the American economy.
Instead, the US Dollar is benefiting from its safe-haven status as markets prepare to face another week of coronavirus-led economic volatility. Consequently, investors are flocking to the ‘Greenback’ as favourability of risky assets begins to ebb.
The Pound (GBP) Struggles Despite Covid-19 Hopes of Coronavirus Slowdown
The Pound (GBP) struggled to gain against the stronger US Dollar despite Professor Neil Ferguson, an epidemiologist and advisor to Downing Street, saying that the UK’s coronavirus cases were beginning to show signs of slowing down.
Mr Ferguson commented:
‘In the UK we can see some early signs of slowing in some indicators – less so deaths because deaths are lagged by a long time from when measures come in force.’
‘It has not yet plateaued, so still the numbers can be increasing each day but the rate of that increase has slowed.’
Friday also saw the credits rating agency, Fitch, downgrade the UK’s sovereign debt from AA to an AA- rating. This follows UK Prime Minister Boris Johnson’s plans to increase spending to bolster the UK economy through the coronavirus crisis.
Sterling traders are remaining cautious, however, as the UK faces its second week of lockdown. Any signs of the UK coming under further stress will see the GBP/USD exchange rate plummet further.
GBP/USD Outlook: Weak Q4 Growth Could Weaken the Pound
The US Dollar (USD) is expected to hold onto its gains this week as investors continue to seek out safe-haven currencies amid the Covid-19 pandemic.
USD investors will also be awaiting tomorrow’s release of the US consumer confidence report. Any signs of slippage in March would, however, clip some of the ‘Greenback’s gains.
Sterling traders, meanwhile, will be paying close attention to tomorrow’s publication of the UK growth report for the fourth quarter. We could see the GBP/USD slip further if the UK’s economy looked grim even before the coronavirus took hold.