Pound to US Dollar (GBP/USD) Exchange Rate Sinks by 2% as ‘Greenback’ Demand Rises
The Pound to US Dollar (GBP/USD) exchange rate plummeted by -2% as investors take refuge in the safe-haven ‘Greenback’ amid growing global recession odds. The pairing is currently trading around $1.185.
The US Dollar (USD) rose against many of its competitors today. Investors continue to seek out the most liquid currency as the coronavirus wracks market risk-appetite.
Analysts at Reuters:
‘The [US Dollar] extended its gains on Wednesday and hit new multi-year highs against both the Australian and New Zealand dollars, as companies and investors worried by the coronavirus outbreak rushed to the world’s most liquid currency.’
The USD/GBP exchange rate has continued to climb on growing expectations that the Eurozone and Chinese economy could face long-term damage from the Covid-19 outbreak. Consequently, safe-haven demand for the ‘Greenback’ has rocketed.
Investors are now awaiting US President Donald Trump’s announcement on further stimulus measures to bolster the American economy going forward.
Pound Falls as Analysts Warn GBP Could Sink to ‘Places Even Brexit Couldn’t Reach’
The Pound (GBP) fell against the stronger US Dollar (USD) as UK recession fears continue to haunt British markets, with Covid-19 set to severely weaken the economy going forward.
Peter Stoneham, a Market Analyst at Thomson Reuters, said that Covid-19 could take Sterling ‘to places even Brexit couldn’t reach’. Mr Stoneham comments:
‘Sterling might drop through its post-Brexit-vote lows against the U.S. Dollar, Euro and Yen if risk aversion caused by the accelerating coronavirus outbreak continues.’
Today also saw Andrew Bailey, the Bank of England’s (BoE) new Governor, warn that the UK now faces an economic emergency. He said:
‘We want to minimise the economic disruption and don’t want a persistent effect that destroys the supply capacity of the economy … We are facing an emergency… But we are ready to do whatever we have to do.’
With echoes of the 2008 financial crash leaving Sterling traders feeling jittery, it’s unlikely that the Pound will make any significant gains against the US Dollar in the next few days.
GBP/USD Outlook: Sterling Could Recover on Further UK Economic Stimulus Measures
Market attention now turns to the British Government following yesterday’s announcement of a £350bn stimulus package to bolster the British economy from Covid-19’s impact.
However, if Downing Street offers to provide businesses further support, we could see GBP/USD exchange rate claw back some of its losses.
USD investors will also be paying close attention to the US Government’s response to its domestic economy amid the growing pandemic.
The US Dollar (USD) is, however, likely to continue to benefit from it safe-haven status.