Pound Sterling (GBP) Sentiment Fragile as PM Boris Johnson Sent to Intensive Care
The Pound Sterling US Dollar (GBP/USD) exchange rate rallied by around 0.5% this morning as risk appetite rose. This left the pairing trading at around $1.2289.
Sterling was able to make gains against the Dollar after markets received a boost from an upswing in risk appetite.
However, GBP sentiment was left fragile as Prime Minister Boris Johnson remained in hospital after being admitted on Sunday night for persistent coronavirus symptoms.
Sentiment suffered a further blow after the Prime Minister was admitted into intensive care on Monday evening after his condition deteriorated.
Downing Street said Johnson remains conscious and is receiving ‘excellent care’.
According to Ilan Solot, an FX strategist at Brown Brothers Harriman:
‘If he is impaired from resuming his official duties, then it creates some complications but we have to wait and watch.’
Meanwhile, Britain has no formal succession plan if the PM becomes incapacitated, although Johnson asked Foreign Secretary Dominic Raab to deputise for him.
Commenting on this, Edward Moya, senior market analyst at OANDA wrote:
‘It is unclear what the emergency succession plan would be for the prime minister. Markets hate uncertainty and this does not bode well for further steps in battling COVID-19 and for future Brexit trade negotiations.’
US Dollar (USD) Falls as Investors Look for Signs of a Peak
The US Dollar slipped against a handful of currencies on an upswing of risk appetite as coronavirus cases continued to slow.
Sterling was able to claw back recent losses against the ‘Greenback’ despite sentiment remaining fragile after the PM’s move to intensive care.
USD suffered losses as traders flocked to the safety of the Japanese Yen (JPY) after Japan unveiled a massive $1 trillion stimulus package to offset the impact of Covid-19.
Meanwhile, investors are looking for signs the virus has peaked, although some analysts have warned that due to the unpredictable nature of the virus, volatility is likely to increase.
Commenting on this, Takuya Kanda, general manager of the research department at Gaitame.com Research Institute said:
‘Signs of a slowdown in the spread of coronavirus provided markets a boost, but the reality is we cannot be certain, so it’s natural for the Dollar to come lower.
‘It’s difficult to trade solely on the factors from one country, because so many countries are in a bad state because of coronavirus.’
Pound US Dollar Outlook: Will Risk Appetite Increase Further?
Looking to this afternoon, the US Dollar (USD) could suffer further losses against the Pound (GBP) following the release of February’s job openings data.
If JOLTs jobs data reveals the number of openings declined before the coronavirus pandemic hit the economy, the ‘Greenback’ will edge lower.
Meanwhile, if risk appetite continues to rise the Pound could make further gains against the Dollar, which will send the Pound US Dollar (GBP/USD) exchange rate higher.