Pound Sterling US Dollar (GBP/USD) Exchange Rate Slips as UK Stuck Behind Europe in the Crisis
The Pound Sterling US Dollar (GBP/USD) exchange rate slumped on Wednesday, leaving the pairing trading at around $1.2373.
Sterling fell against the US Dollar today, as reports revealed the UK has drawn up a three-stage plan to ease the coronavirus restrictions.
This comes Boris Johnson’s government must review the lockdown, although the Prime Minister has noted he is worried about triggering a second wave of the virus.
The Times said the first phase involves small shops reopening, as well as outdoor workplaces. The second phase will involve large shopping centres while more people will be encouraged to go back to work.
The newspaper also added that places such as pubs, restaurants and hotels will be the last places to open.
According to Derek Halpenny, MUFG strategist:
‘Another three weeks of lockdown, or close to that, is likely to be confirmed by PM Johnson on Sunday, underlining again the fact that the UK is behind the rest of Europe in this crisis.
‘We continue to see downside risks for the pound given the severity of the COVID impact looks to be greater in the UK than elsewhere.’
Fed: US Economy to Start Recovery in Second Half of 2020
Riskier assets such as the Pound were offered some support after a top US Federal Reserve policymaker noted the country’s economy could begin to recover in the second half of the year.
However, these gains were lost as traders worried about the UK extending the current lockdown.
This comes as many US states begin or have moved towards reopening their economies which have been under lockdown to slow the spread of the coronavirus.
In an interview with CNBC, Fed Vice Chair, Richard Clarida said:
‘We’re living through the most severe contraction in activity and surge in unemployment that we’ve seen in our lifetimes. Unfortunately, the unemployment rate is going to surge to numbers that we’ve not seen probably since the 1940s.’
However, Clarida noted he was optimistic the Fed could limit the damage to the economy. He noted that it was ‘in the range of possibility’ for the economic recovery to begin in the second half of 2020 once businesses reopen.
Pound US Dollar Outlook: Bank of England in Focus
Looking ahead to Thursday, traders will be focused on the Bank of England’s (BoE) interest rate decision which could cause the Pound (GBP) to slide further against the US Dollar (USD).
If the BoE emphasises the lasting damage to the British economy caused by the coronavirus lockdowns, Sterling will fall.
Meanwhile, the Pound could be offered some support following the release of further US unemployment statistics.
Risk appetite could be offered a boost if the number of Americans claiming unemployment benefits falls for another week, which would leave the Pound US Dollar (GBP/USD) exchange rate flat.
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