The British pound is lower against the US dollar on Tuesday afternoon as markets adjusted for a much greater chance of action at the Bank of England’s meeting on Thursday than the US Federal Reserve’s meeting a day before on Wednesday. Both central banks will set interest rate policy, but it is only in the UK that rates are likely to be lowered.
GBP/USD was lower by 46 pips (-0.36%) at 1.3009 with a daily price range of 1.30 to 1.307 as of 1.30pm GMT. There was a bout of early selling on Tuesday before the currency pair stabilised above 1.30 at a new 1-week low.
The US dollar has been part of a small cohort of haven currencies, including the yen and Swiss franc seeing demand amid the coronavirus outbreak in China this week. On Tuesday there was some evidence that market sentiment was turning with haven currencies turning lower and riskier currencies like the Australian dollar bouncing strongly off lows of the day.
The lift in sentiment comes after virus expert Zhong Nanshan, who leads the health commission team investigating the outbreak of the coronavirus officially named 2019nCov said the number of people infected will peak between one week and ten days.
The dollar lost some of its shine after some disappointing economic data suggested there is still a long way to go before US factories are back on their feet following a multi-month contraction. On Tuesday data showed US durable good orders for December rose 2.4% but that Non-defence Capital Goods Orders ex Aircraft fell -0.9% when no change was expected.
Fears that Britain could leave the European without a trade deal compounded bets that UK interest rates might be cut by the Bank of England this week.
At a press conference on Tuesday with Irish Prime Minister Leo Varadkar, the EU Chief Negotiator Michel Barnier said about the upcoming trade talks with the UK “If we have no agreement, it will not be business as usual and the status quo. We have to face a risk of a cliff edge, in particular for trade.”
