Pound to US Dollar Exchange Rate: Demand for USD Soars as UK Provides Support Package

Pound to US Dollar Exchange Rate: Demand for USD Soars as UK Provides Support Package

In the trading world, the outlook for the global growth sentiment is impossible to predict under current conditions. Currencies are rising and falling at the hands of the coronavirus outbreak and the widespread fear it has caused. The demand for US dollars has rose over the week as investors flock to the safe-haven currency amid the coronavirus crisis. Meanwhile, the UK has stepped up its support package offering for the UK economy, offering to spend more if needed. The UK Chancellor noted that the UK is facing an ‘economic emergency’, unlike anything seen during peacetime before. The UK also could look to shift their containment efforts to match that of their European neighbours like Italy and Spain by going into ‘lockdown’.

Demand for USD Shoots up on Liquidity Fears

The US dollar (USD) appreciated in value yesterday, rising by almost 2% against some of its peers as demand for the safe-haven currency due to the coronavirus crisis was exacerbated by concerns of a possible USD shortage. This uptrend in the US dollar also came in spite of a surprise contraction in US retail sales last month. The retail sales report dropped from 0.6% to -0.5%. The retail Sales released by the US Census Bureau measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending.

With the Federal Reserve taking steps to improve liquidity we may see demand for the US Dollar ease somewhat today, but with the coronavirus still dominating headlines the currency is likely to remain well supported.

UK Provides Further Financial Support and Could Switch to Lockdown Phase

The pound (GBP) traded in a narrow range during yesterday’s session as GBP investors appeared to welcome the UK government’s £330bn coronavirus support package. In announcing the stimulus Chancellor Rishi Sunak said the UK is facing an ‘economic emergency. Never in peacetime have we faced an economic fight like this one’ and pledged to spend more if needed. The UK government also pledged to spend more should there be justification to do so, which looks more and more likely as businesses across the UK, particularly small-scale ones, close their doors amid the coronavirus pandemic.

Looking ahead, GBP investors will remain focused on the government’s approach to coronavirus as they expect the UK to begin preparations to enforce large-scale quarantines like its European neighbours Italy and Spain. Many have noted that governments lack of urgency regarding the virus with UK schools remaining open and the nation operating in the ‘delay’ phase of containment.

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