UK Government Coronavirus Response Under the Spotlight
The pound to US dollar rate finished last week below the 1.23 benchmark for the first time in over five months. No prizes for guessing what left it down in the dumps, after the nation battened down the hatches to delay the spread of the coronavirus. The government moved to the “delay” phase of its plan to tackle the pandemic on Thursday, but many experts believe the UK’s response falls way short of other countries.
On Friday, the Bank of England (BoE) released the minutes of its emergency meeting last Wednesday, when it slashed interest rates. According to the central bank, economic activity will “weaken materially” over the coming months. The BoE raised expectations of a second quick-fire rate cut by reassuring the nation that it has the necessary tools at its disposal to fight the economic shock.
Risk-Off Mood Sees Dollar Advance
All roads led to the dollar towards the end of last week, which established newfound momentum after a two-week slump, as investor appetite for riskier assets waned. It extended gains thanks to action taken by central banks and governments, which moved to cushion the blow dealt by coronavirus on the global economy – including the Bank of Canada, which slashed slates interest rates in a surprise move on Friday.
Over the weekend President Donald Trump extended the European travel ban he implemented last week to include Britain and Ireland, as the US seeks to contain the coronavirus pandemic. Mr Trump originally exempted Britain and Ireland from his 30-day ban on flights from 26 European countries that came into effect on Friday. The new travel restrictions will commence at midnight this evening, according to US vice-president Mike Pence. The move sapped risk appetite even further and sent investors scrambling for the dollar.
The UK unemployment rate – which is expected to remain unchanged at 3.8% – is due for release tomorrow, along with the claimant count and average earnings figure. The pound will be hoping for some positive news from the jobs market that can help it regain its footing.
Tomorrow’s US industrial production and retail sales figures will provide a gauge of the extent to which the coronavirus outbreak is impacting industry output and consumer confidence.
To discuss how these and other factors could impact your upcoming currency exchange, feel free to get in touch with me directly, Matthew Vassallo, using the form below. I’ll be happy to contact you personally to discuss your enquiry.