Record number of Americans file for unemployment
The dollar tanked against the pound yesterday in the wake of a disastrous employment report, propelling the GBP to USD rate above the 1.20 benchmark. A record number of people filed claims for unemployment in the US last week, as the coronavirus pandemic brought huge swaths of America’s economy to a grinding halt. Official Labor Department figures revealed that the number of claims rose to 3.3 million, smashing the previous record of 695,000 in October 1982 – fresh evidence of the severe economic downturn faced by the US, as business owners shutter their operations.
The Trump administration is pushing through a $2 trillion stimulus package that includes payments to taxpayers and bailouts for faltering industries. While the financial measures won’t head off a huge surge in unemployment, they have raised hopes the economy can weather the coronavirus pandemic. This has dampened safe-haven dollar demand, as investor confidence grows and they become less risk-adverse.
Chancellor announces self-employed subsidy to fight coronavirus
While pound investors eagerly awaited the treasury’s financial support package for the self-employed, the Bank of England voted unanimously to maintain the bank rate at 0.1%, following two emergency interest rate cuts earlier this month. The central bank said there is now greater clarity on what the coronavirus crisis is likely to mean for the economy, warning of a “large and sharp” UK downturn. They did provide a glimpse of hope, however, stating that the economic shock “should ultimately prove temporary.”
By this morning, the pound to US dollar rate had climbed over the 1.21 benchmark for the first time since 17 March, on the back of the chancellor’s scheme to bailout self-employed workers facing financial hardship as a result of coronavirus.
Meanwhile, the latest retail sales data showed that wet weather in February kept Britain’s shoppers in their armchairs, resulting in a fall in sales even before the coronavirus pandemic forced the government to close all non-essential shops. Things are only expected to get worse for the high street, with experts forecasting the biggest fall in sales for over a decade forecast this month due to coronavirus-imposed shutdowns.
The House of Representatives is set to vote on the coronavirus relief stimulus package today after it was passed by the US Senate. While some meaningful changes might be made to the bill before it receives approval; once it’s signed and enacted by US President Donald Trump, dollar demand is likely to fall as market sentiment improves.
The Michigan consumer sentiment index – a survey of personal consumer confidence in economic activity – for March is expected to show how unwilling consumers are to part with their hard-earned cash in the current economic climate.
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