Monday’s trading session can only be described as volatile for the USD/GBP exchange rate pairing, but heading into the second trading day of the week the pound saw a slip against the US dollar This morning, which pared the gains witnessed on Monday. The GBP/USD exchange rate ended Monday trading flat at $1.3104 following a rally which took the pairing to $1.32 earlier in the session. Earlier this morning the GBP/USD rate was trading 0.6% lower at $1.3050, which ruined a five-day streak as Brexit concerns returned back to the UK spotlight, with the coronavirus containment policies doing little to support GBP but instead boosting USD.
Brexit Causes GBP to Slump as Negotiations Back in Focus
Markets were chaotic in the opening trading day of the week yesterday, with panic and fear filling the air. The pound experienced significant volatility in one of its worst one-day sell-offs since 2008. However, at the start of today, investors were recouping their losses as a return in sentiment looked on the horizon as markets had a calmer edge. GBP investors snapped their focus back on the domestic issues of the country, like the ongoing Brexit negotiations. Wednesday will also see the UK’s budget agenda from the Treasury which will give an insight into the UK’s future investment plans in order to try to boost fiscal stimulus.
GBP investors are growing increasingly concerned for the likelihood of the UK being able to come to an agreement by the December 2020 Brexit deadline. With factors affecting both the domestic and global economy, the UK has to remain on track for the talks despite a constant onslaught from not only trade deal differences but also the coronavirus disruption which is sinking currencies across the globe.
Improved Sentiment Sees USD Rise
Global policy makers are attempting to contain the coronavirus outbreak across the globe, but in doing so they are helping to raise the risk sentiment and lift the US dollar on Tuesday. Some of these containment efforts included stimulus from President Donald Trump and the reopening of Wuhan’s borders for travellers, with Wuhan being the epicentre of the outbreak.
President Trump made an announcement that he will seek economic relief from Congressed, a move which has helped lift USD. Economic relief from payroll tax and help for workers has boosted sentiment and eased the heightened fears over the impact of coronavirus on the US economy.US equity futures and US treasury bonds also saw a slight recovery which has helped USD pick up from its recent multi-month lows.
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