Pound to Dollar Forecast: GBP to USD Rate Plunges to Lowest Level For 35 Years

Pound to Dollar Rate Recovers Losses

Pound Falls for Seventh Consecutive Day

The financial impact of the coronavirus outbreak is sending shockwaves throughout the global economy. So much so that the pound to US dollar rate plunged to its lowest level since 1985 yesterday, after seven consecutive days of declines.

The pound, which dipped below the €1.15 benchmark this morning, began its descent last week when the Bank of England (BoE) cut interest rates to a record low in a bid to prop up the economy. Since then, investors have been favouring other major currencies like the safe-haven dollar, as markets assess the wide-ranging economic impacts of the pandemic. Even the announcement of a £350bn stimulus package of government-backed loans and grants for businesses couldn’t calm the panic in markets, with fears of a recession growing by the day.

Coronavirus Fears Fuels Dollar Demand

The dollar was riding high yesterday as companies and investors spooked by the coronavirus outbreak retreated for the safety of the world’s reserve currency. The US Federal Reserve has made it easier for five of the world’s major global central banks to provide dollar funding to financial institutions, by relaxing the terms for currency swaps.

The dollar continued its relentless march higher against major currencies this morning, as fierce financial market volatility and concerns surrounding tightening liquidity sparked by the global health crisis triggered a flight into cash. Investors are selling up to keep their money in dollars due to the unprecedented amount of uncertainty in financial markets, with the pandemic threatening to debilitate large swaths of the global economy.

Looking Ahead

There is a ray of hope for the pound, with economists predicting that it will retrieve some of its losses in the coming months. The level of fiscal-monetary coordination by the UK government and the BoE is expected to put the pound on a firm footing once the global economy stabilises – but how soon that happens is anyone’s guess.

The result of today’s Philadelphia Fed manufacturing survey for March could provide an indication of how much the coronavirus outbreak is holding back the US economy. Upcoming data releases will reflect activity since the outbreak escalated into a global economic crisis and could trigger further emergency measures from the Fed and the BoE. The severity of the whole situation is reflected in rumoured US economic stimulus plans worth around $1.2 trillion.

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