The Pound sold off steeply versus the US dollar on Wednesday. As investors digested a 50-basis points rate cut and a £30 billion spending spree from the UK Chancellor, the Pound dropped 0.7% against the greenback. The pair closed Wednesday’s session at US$1.2820.
At 07:30 UTC, GBP/USD is holding steady at US$1.2820 after the World Health Organisation declares a pandemic and President Trump announces a travel ban.
Coordinated Approach Doesn’t Support Pound
The Pound ended Wednesday lower across the board after investors digested 0.5% interest rate cut from the Bank of England and £30 billion emergency stimulus package from the Government for coronavirus. This was a coordinated response to the coronavirus threat set to hit the economy over the first half of the year.
The moves by the BoE Governor Mark Carney and Chancellor Rishi Sunak come as the number of coronavirus cases increase to 500 and the death toll hits 8.
Amid the coronavirus situation, Brexit fears are also rising. Post Brexit trade talks has been postponed until next week. However, if the spread of coronavirus worsens, which is looking very likely, then the talks could be pushed back further. Trade talks are already on a very tight timeline. Talk of a delay is unnerving Pound investors.
US Dollar Drops On Trump’s Supportive Measure
The US Dollar rebounded off session lows to close Wednesday broadly higher versus its major peers. The Dollar was on the front foot despite risk sentiment taking another hit as the World Health Organisation declared coronavirus a pandemic. The declaration doesn’t change policy responses. Each country is responsible for their own policy response. However, the announcement did inject an additional layer of fear into the financial markets.
However, the US Dollar is trading broadly lower versus its major peers on Thursday after President Trump announced a travel ban between mainland Europe and the US. Trump also announced a package of measures to support workers and businesses in an attempt to shore up the economy in ahead of the expected coronaviruus strains on the economy.
Investors are now expecting an additional rate cut from the Federal Reserve in the monetary policy meeting next week.
