Pound Sterling US Dollar (GBP/USD) Exchange Rate Falls as Traders Flock to Safety After Oil Price Crash
The Pound Sterling US Dollar (GBP/USD) exchange rate slipped on Tuesday, leaving the pairing trading at around $1.2351.
The US Dollar made gains against the Pound as investors were still skittish after Monday’s oil price crash flocked to the safety of the US Dollar.
On Monday, US crude futures plummeted below zero for the first time before bouncing back on Tuesday.
Commenting on yesterday’s fall, Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney said:
‘Oil is off its’ lows, but a lot of companies are going to get hit and companies could start to fail.
‘If share prices have a pullback, the Dollar could see some gains as a safe haven. The only thing that’s capping the dollar is that the Federal Reserve has done more quantitative easing than anyone else.’
Added to this, risk sentiment was also hit after media reports stated North Korean leader Kim Jong Un was receiving treatment after undergoing a cardiovascular procedure.
Sterling (GBP) Hits 12-Day Low Against the US Dollar (USD)
The Pound slumped against the US Dollar after data showed the number of people in work great a slower pace in February in the UK.
Sterling struggled to make gains as it was in early sign of what’s to come for the country’s labour market thanks to the coronavirus lockdown.
According to the Office of National Statistics (ONS), the number of employees on companies’ payrolls slowed to 0.8% in March compared to February’s 1.1%.
Commenting on this, David Freeman, a labour market statistician at the ONS stated:
‘These experimental statistics show a softening picture in March, but cover the month as a whole including the period before the coronavirus restrictions were in place.’
Other data from the ONS revealed that the number of Brits claiming unemployment benefits rose by 12,100 in March. This was lower than the 172,500 claims expected by economists, although the data was collected before the country went into lockdown.
However, UK employment data had little effect on GBP as the pairing slumped to a 12-day low earlier this morning.
Commenting on this, Kenneth Broux, FX strategist at Societe Generale said:
‘UK labour market data was largely a non-event […] Today it’s all about Dollar strength and low oil prices.’
Pound US Dollar Outlook: Will Traders Continue to Flock to the Safe-Haven USD?
Looking ahead, the Pound (GBP) could continue to suffer losses against the US Dollar (USD) if traders remain cautious.
If risk appetite takes a further hit, investors will continue to flock back to the safety of the ‘Greenback’.
Meanwhile, disappointing UK inflation statistics could send Sterling lower on Wednesday.
If inflation slumps further than expected in March as the UK was hit by the coronavirus pandemic, the Pound US Dollar (GBP/USD) exchange rate will slide.
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