The Pound (GBP) has jumped sharply higher versus the US dollar (USD) at the start of the new week. The Pound to US Dollar exchange rate is extending gains for a sixth straight session versus the greenback as coronavirus fears drive trading. The pair closed the previous week 1.8% higher at US$1.3050.7
GBP/USD pushed through US$1.31 overnight in the Asian session. At 07:30 UTC GBP/USD is up a further 0.6% at US$1.3128.
BoE Calm
The pound has pushed higher thanks to a calm approach from the Bank of England in the face of coronavirus. After the Fed slashed interest rates by 50 basis points, the Bank of England had been expected to follow in their footsteps. However, incoming governor Andrew Bailey said that he would prefer to wait to see what the Chancellor brings in the Budget and what the incoming data shows. This eased fears that the BoE was on the verge of cutting and the central bank is now expected to wait until its meeting on 26th March to take any decision, which is supporting the pound.
In addition to coronavirus and the Budget, investors will also be digesting Brexit developments, which could cap the gains on the pound. At the ed of the first week of post Brexit talks EU chief negotiator Michel Barnier said that there could be difficulties reaching an agreement by the end of the transition period.
Dollar Expects More Rate Cuts
The dollar plunged across the latter part of the previous week. Whilst the Federal Reserve slashed interest rates last Monday, market participants are expecting the Fed to cut rates further in order to contain the negative impact to the US economy that the virus is expected to bring.
Fresh data is doing little to support the US Dollar. The dollar fell on Friday despite US non-farm payrolls smashing expectations. Analysts had expected 175,000 jobs to have been created in February. Instead 273,000 jobs were created, whilst unemployment dropped to 3.5% from 3.6%, showing that the US economy is in a good place right now.
However, the number of coronavirus cases in the US began to accelerate at the end of February. Fears of the impact of the coronavirus far outweigh the stellar jobs report.
There is no high impacting US data to focus on. Investors will stay glued to coronavirus headlines.
