GBPUSD surged almost 7% in a week of extreme volatility, which saw rates as low as 1.1455 and reaching highs of 1.2477 (interbank levels). Markets responded nervously to coronavirus news, central banks actions, national lockdowns, and economic data, which pointed towards a sharp slowdown in growth and the almost certain recession that the world faces.
UK on Lock-Down
The week begun with Prime Minister Boris Johnson addressing and ordering the nation to stay at home. More businesses shut shop overnight and people were restricted to all but essential travel. For the majority, that was access to food and medical supplies, and exercise, whether that be a run, walk, or cycle. Although, exercise was to be limited to one outing per day. The simple message was “You must stay at home”. By the end of the week, Boris Johnson confirmed that he himself had tested positive to coronavirus and was self-isolating.
Emergency Economic Measures
Having already acted twice this month with emergency measures, the Bank of England left interest rates unchanged at 0.1% and quantitative easing at £645 billion at the official monthly meeting. However, warned against the expected rise of unemployment.
Rishi Sunak, the new Chancellor had already announced measures for the employed, but this week announced similar measures for the self-employed although, received criticism when it was announced that the plan would not kick in until June, 3 months-time.
US Federal Reserve Launches Quantitative Easing Programme
On the other side of the pond, the Federal Reserve launched a quantitative easing programme on an unprecedented scale. The US$2 trillion package received unanimous support in the senate and Jerome Powell, Chairman of the Federal Reserve, was careful to state that the bank would not run out of firepower. The Federal Reserve’s balance sheet increased by 12.4% last week, and on Wednesday had ballooned to an eye-watering US$5.3 trillion. In other economic data, weekly jobless claims increased rapidly to more than 3 million, a rise of more than 1000 percent.
The US has become the first country to exceed 100,000 positive coronavirus cases. Hospitals have sounded the alarm about the urgent need for more supplies and on Friday, the president instructed General Motors under security law to mass produce ventilators.
GBPUSD has frequently moved with no clear reason for direction and with continued uncertainty and this seems likely to continue.
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