GBPUSD rebounded strongly from Wednesday’s low of 1.2390, almost reaching 1.2650 during yesterday’s trading, a bounce of 1.8 percent. The US dollar weakened following a raft of poor economic data. Weekly jobless claims increased by 3.8 million, personal spending contracted 7.5 percent in March, the largest decline on record, and personal income dropped 2 percent. The gloomy data increased fears about the impact of the coronavirus crisis shutdown.
US Federal Reserve Keep Interest Rates on Hold
The Federal Reserve left policy unchanged at Wednesday’s monetary policy meeting but reiterated its pledge to do whatever it takes, which has also weighed on the US dollar. Federal Reserve Chairman, Jerome Powell confirmed that rock-bottom interest rates would remain until the economy returns and called on the government to expand its fiscal stimulus.
Dismal figures on Wednesday confirmed annualised GDP had fallen 4.8 percent which was worse than expected, causing the US dollar to lose value, and the expectation for Q2 GDP is much gloomier.
The market has generally been in an upbeat mood, with global coronavirus cases and death rates falling, lessening the need for the global safe-haven currency. Also, encouraging early results for Gilead’s Remdesivir drug, which lowered the mortality rate and assisted the recovery rate for coronavirus infected patients, pleased investors.
UK to Publish Exit Plan Next Week
Boris Johnson will set out a comprehensive plan next week, explaining how the UK can continue to suppress the virus, whilst getting the economy moving again. The prime minister confirmed that the UK has passed its peak and that we can now see the sunlight. However, Mr Johnson insisted that to avoid disaster of a second wave, the country must meet 5 points of criteria before social distancing measures can be relaxed.
There will be several issues that the government address in their plan; How to get children back to school, how people can travel to work, and how we can make the work environment safer.
Boris said that the UK would not look towards austerity after the crisis but instead seek to inspire an economic bounce. There was also a mention about face masks, saying they would be useful in coming out of lockdown.
Earlier in the day, Labour leader Sir Keir Starmer had said “I think the government were slow into lockdown, slow on testing, slow on protective equipment, and may now be slow on our exit strategy.” He had also described an inquiry into the UK’s response to the pandemic crisis as inevitable.