GBPUSD has remained volatile as investors attempt to assess what impact coronavirus will have on global and national economies. Sterling ended the week on the back foot, slipping 1.5%, after a gain of nearly 7% in the previous week. Since the Federal Reserve announced $2.2 trillion of fiscal stimulus, the dollar has seen less demand as a safe-haven currency and sterling has held on at these higher levels, although as coronavirus now seeks to spread more rapidly, taking more human casualties and causing more economic destruction, investors may soon look to the US dollar again.
The number of infections and deaths in the UK is rapidly rising and the steep upward curve is showing few signs of plateauing. Instead, experts predict this trend will continue, and with limited testing capabilities, it is widely recognised that the UK has far more infected than what the statistics say. Quite simply, the UK government does not have the testing equipment to carry out the number of tests needed, currently only able to carry out 10,000 per day.
US Unemployment Rises
Similarly, the number of infections and deaths in the US is also increasing at an alarming rate with more than 200,000 confirmed cases. Like the UK, the trend is one of a rapid rise, as opposed to a curve that’s softening. The US government has issued guidance for Americans to stay at home and President Donald Trump’s hopes for the US to return to normality by Easter are no longer being spoken of. Non-Farm Payrolls and US jobless claims data confirmed a catastrophic impact on employment although these numbers are only the start.
Investors will closely watch UK and US infection and death toll numbers for future direction on GBPUSD. A lessening on numbers and a move towards a less steep curve will point towards a peak and could leave the pound hanging on to these higher levels but if numbers continue to rise, investors will fear global economic devastation and look again to the Greenback for support.
Brexit talks have been muted but with Boris Johnson still sticking to his promise and not extending the transition period beyond January next year, this could place more pressure on the pound as investors fear the UK leaving the European Union with only a basic World Trade Organisation deal in place.
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