The pound has managed to regain some much needed ground versus the US dollar this morning on the announcement from the US that a deal has been agreed on an almost $2trillion dollar support package in an attempt to stem the economic impact as Coronavirus takes hold throughout the US.
This is a landmark move for the US and what is expected to be the largest US stimulus measure ever passed, as the legislation is expected to be ratified at speed over the coming days. This deal would see the US government delivering critically needed financial support to businesses impacted by the pandemic – many forced to shut their doors in the wake of the virus’ spread. It would also see a much needed investment into hospitals and direct payments and jobless benefits being paid in to American families.
As markets adjusted to this news in recent hours the pound managed to push back through 1.19 versus USD for the first time this week.
Investor sentiment key to GBPUSD Rates
The pound has been falling significantly in value against most major currencies over the past two weeks and has posted a drop of over 15 cents against USD since March 10th from a rate of 1.2976 to a low of 1.1409 by 19th. We open this morning at 1.19, the pound’s strongest level so far this week. The next few days will be key to assess whether sterling has enough weight behind it to get back through this level. The USD remains a critical safe haven currency in times of increased investor fear; this has caused an influx of capital investment in to USD as COVID-19 grips the world.
Seen as a risky asset, the pound has in stark contrast been aggressively sold as the UK battles with its own increase of Coronavirus cases and sees weeks and months being wiped off of vital negotiations of trade negotiation with the European Union as central governments attention is turned to more urgent matters at home.
UK seeks clarification on new restrictions and government aid
As the UK entered its first day of virtual lockdown yesterday, there have been calls for greater clarity on ‘essential travel’ following images of packed tube trains throughout London and financial protection for the self-employed.
Last week the UK Government announced a new support scheme to help businesses pay the wages of their employees by up to 80 per cent however, the support for around 5 million self-employed workers amounts to £94 per week leaving them ‘out in the cold’ in comparison to the employed.
Questions are now being asked of the Bank of England over how they can help temper the economic impact further and suggestions of a broad quantitative easing package being announced could see the pound under increased pressure.
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