Last week the pound suffered one of its worst single days of trading against USD; the pound started the day on 18th March above 1.21 before ending the session at 1.1440 recording a 35 year low for the British currency. Only 10 days earlier the pound reached a high of 1.3190 vs USD, before the increased level of fear in the financial market caused by the growing fast spread of the COVID-19 virus. During this time, we have seen the number of confirmed cases and deaths rapidly grow in both the UK and the United States.
The US Federal Reserve (Fed) were one of the first central banks to announce a surprise interest rate cut, with two cuts in March from 1.75% down to record lows of 0.25. The Fed have also restarted its QE (Quantitative Easing) programme with unlimited figures as a do all it takes strategy to help the ailing economy. With the US taking such decisive action, global stock markets fell around the world with this US dollar become the of the currencies trader’s choice to buy heavily based on its safe haven status. The pound quickly became a casualty of this as the UK’s uncertain future especially with the chances of Brexit no deal increased by the unfavoured currency for traders. This was not helped as the UK government and Bank Of England were being accused by some of not reacting to the spread of the corona virus quickly enough.
However in the last week the Boris Johnson and The Bank Of England have both shown they are ready to act with the announcement the closures of schools, pubs, clubs, shops and many more while insisting the everyone in the country remains at home and takes part in ‘social distancing’. Plans are also in place to financially support businesses and employees who are unable to work during the lock down. The Bank of England have also cut interest rates from 0.75% to 0.1%. This has helped give market confidence to support pound again.
After seeing the pound vs dollar drop to its lowest level in 35 years it now appears with the UK settling into quarantined life, the pounds has been able to regain some losses with 3 back to back days of gains it has seen highs of 1.2001 by midday today. With the spread of the virus far from being contained its impossible to anticipate how badly it will damage the economy for both the UK and US, the pounds value still remains valuable and the US dollar will be expected to remain the currency to rush to if uncertain times get even more uncertain.
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