The Pound is trending lower versus the US Dollar on Tuesday for a second straight session amid growing recession fears. The Pound US Dollar exchange rate closed on Monday 1% lower at US$1.2268
Today, at 07:30 UTC GBP/USD is trading -0.25% at US$1.2230 after having struck a fresh 5 month low of $1.2204 overnight.
Recession Fears Hit Pound
The pound continues to trade at 5-month lows as coronavirus and recession fears drive trading. The government stepped up its response to coronavirus, advising Britons to avoid pubs, travel and shops. At the same time these very businesses demand billions from the government in help to avoid collapsing.
Following a devastating warning from the leisure, transport and retail sectors the UK government is trying to put together a rescue package to save business from the impact of coronavirus.
Airlines, train companies, retailers, pubs and restaurants warned that the £7 billion that the Chancellor set aside in his Budget to help businesses deal with coronavirus is insufficient. As society increases social distancing measures these businesses will grind to a halt threatening hundreds of thousands of jobs. Fear of recession is driving the pound lower.
Today there is UK jobs data to be released. Analysts are forecasting that unemployment remained steady at 3.8% in the three months to January. Investors are not expected to pay attention to the data, which was from before the coronavirus outbreak in Europe.
Fed Failed To Lift Risk Sentiment, Will Washington?
Whilst the US Dollar traded higher versus the Pound on Monday, it traded broadly lower versus other major peers. The US Dollar was broadly out of demand following a 1% rat cut by the Fed on Sunday evening as part of a wider package of measures to shield the US economy from the coronavirus impact.
The package failed to stem risk aversion and the US stock market dived 13% across Monday. The increasingly stricter curbs on public activity to prevent the spread of coronavirus is sending shares and oil process tumbling. The Federal Reserve has thrown everything it has to offer at the problem. Investors are clearly terrified.
Coronavirus will remain sharply in focus again today along with a fiscal policy response from Washington.
