GBP/USD: Pound Below $1.3050 As Risk Sentiment Improves Lifting USD

After an extraordinarily volatile session on Monday the Pound was slipping lower versus the US dollar on Tuesday, paring Monday’s gains. The Pound (GBP) US Dollar (USD) exchange rate ended Monday flat at US$1.3104 after rallying to US$1.32 earlier in the session.

At 07:00 UTC, GBP/USD is trading 0.6% lower at US$1.3050, snapping a five day winning streak as Brexit concerns dampen pound demand whilst coronavirus containment policies are helping lift the dollar on turnaround Tuesday

Pound Slips As Brexit Returns To Focus

The markets were in full on panic mode in the previous session. The Pound experienced high levels of volatility whist the UK stock market experienced its worst one day sell off since 2008. However, at the start of Tuesday, investors were paddling back on sentiment and the markets had a calmer edge. Pound investors returned their focus on domestic issues, as concerns over Brexit ahead of Wednesday’s Budget topped the agenda.

Anxieties are growing over the likelihood of the UK being able to stick to the December 2020 deadline for the transition period amid not only trade deal differences but also coronavirus disruption.

Dollar Picks Up On Improved Sentiment

Global policy makers efforts to confine the negative implications of covid-19 are helping to boost risk sentiment and lift the dollar in early trade on Tuesday. These include expected stimulus from President Trump and the reopening of Wuhan’s borders for travellers. Wuhan is the epicentre of coronavirus.

An announcement by President Trump that he will seek economic relief from Congress has helped lift the US dollar. Economic relief from payroll tax and help for workers has helped lift sentiment and eased fears over the impact of coronavirus on the US economy.

A recovery in US equity futures and US treasury bonds are also helping the US dollar to pick up from multi month lows.

Finally, news that the number of new cases in China has fallen sharply to just 43 news cases, down from 3000 new cases at the height of the spread is also helping investors see that this could be a short lived problem.

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