The Pound has plunged versus the US Dollar to fresh yearly lows as investors fret over coronavirus and the new measures being put into place to stem the spread of the killer bug.
At 13:30 GBP/USD is trading -1.7% lower or 230 points off at US$1.2590. The pair is trading at the low of the day.
Pound Drops As UK Steps Up Coronavirus Response
The Pound is trading lower across the board as the Prime Minister chairs an emergency COBRA meeting to step up the UK response to coronavirus. The UK will move to the “delay phase”. This is aimed at delaying the spread of coronavirus, rather than containing it as in the first phase. This second phase includes some social distancing measures, such as working from home, keeping the vulnerable isolated. However, it stops short for now of an all-out schools’ closure or blanket ban on social gathering. This is when the economic hit will really start to be noticed and when consumer confidence takes a real hit.
Then there is Brexit. Brexit seems like a long way away as coronavirus headlines dominate. However, there is a growing possibility that Brexit talks will be postponed further than just the initial one week. This will pressurise an already very tight timeline, increasing the chances of a no trade deal Brexit.
US Dollar Climbs On Safe Haven Demand
The US dollar has jumped sharply higher on Thursday as stock markets across the globe tank. The US S&P stock market dropped over 9%, hitting off a circuit breaker on the way down. This is a pause for 15 minutes in trading, in order to destabilise the market. Panic has set in and investors are once again turning to the safe haven US dollar for protection.
The Dollar hasn’t benefitted from safe haven flows since the Fed cut interest rates last week. However, failure by President Trump to provide confidence to the market has resulted in investors buying up the buck. Trump’s travel ban has created levels of panic in the market last seen in the financial crisis.
