Sterling Remains Firm Against the Greenback

Pound to Dollar Exchange Rate: GBP Finds Support over 1.25 Against USD

Sterling has been one of the best performers against the US dollar over the past week, gaining almost 7.5% in value. After touching 1.1477 on the interbank market, the pound recovered strongly and is now trading around 1.2350 (interbank market). Following the 35 year low on March 20th, the USD has been pegged back by the Federal Reserve’s ‘do whatever it takes” moment. The Fed’s unlimited quantitative easing plan provided investors with some much-needed respite, allowing them to ditch the dollar. The coronavirus pandemic has prompted the announcement of a $2.2 trillion stimulus package, with more to follow when needed, as this package is only intended to cover three months.

The USA now has more confirmed coronavirus cases than any other country in the world and seems certain to continue that upward trend. As investors weigh up the prospect of the world’s largest economy slowing sharply and entering a deep recession, they may well look again to the Greenback for its safe-haven status.

The fact that the UK’s coronavirus problems continue to escalate has not appeared to hinder the pound’s momentum. The Bank of England along with the UK government seem prepared to do whatever it takes to minimise the potentially catastrophic consequences of the pandemic. UK interest rates have been slashed, huge quantitative easing measures announced, and the new Chancellor has put in place substantial support packages for firms and employees to preserve businesses and employee’s jobs.

The future is all but certain with coronavirus likely to take the driving seat in future GBPUSD movement. Donald Trump hopes to have the US economy moving again by mid-April but unfortunately few people share his optimism. Whilst markets seem content with recent global central banks actions, investors are acutely aware that the global economy is facing unprecedented circumstances on a previously thought unimaginable scale, and so therefore, the next downturn is only a stone’s throw away.

Coronavirus and Brexit

With UK prime minister Boris Johnson, and the EU’s Chief Brexit Negotiator both testing positive for coronavirus, the prospect of the UK-EU reaching an agreement on or before June 30th is seeming ever less likely. Brexit has played second fiddle to the current epidemic, but decisions will soon need to be made on the transition period and whether to extend.

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