The British pound is substantially lower against the US dollar on Tuesday after US Treasury Secretary Steve Mnuchin said the administration wants to get cash into American pockets “immediately” to backstop them against the coronavirus pandemic.
GBP/USD was down by 216 pips (-1.76%) to 1.2050 with a daily range of 1.2004 to 1.2431 of 5pm GMT. The currency pair has slumped 200 pips to its post-Brexit lows near the key 1.20 psychological level. The exchange rate is adding to heavy losses experienced last week, now down -1.35% this week.
British Pound dumped despite likely further fiscal boost
The pound is back down at post-Brexit lows. Sterling has been crushed by a huge upswing in the US dollar on Tuesday, despite talk of a big stimulus package on the way for the British economy. Chancellor Rishi Sunak will join the now daily coronavirus update with Prime Minister Boris Johnson, where he is expected to announce the new measures.
The last time Rishi Sunak announced a new set of spending pledges to support the UK economy, the Bank of England also cut interest rates and traders expect it could happen again today, which is holding back the British pound.
Dollar jumps as US prepares ‘helicopter money’
US Treasury Secretary Mnuchin said in a press briefing today that the Trump Administration wants to get emergency funds to US households. In a very direct manner, Mnuchin said “Americans need cash now,” adding that “The President has instructed me that we have to do this now.” Donald Trump’s initial plan of a payroll tax holiday has apparently been binned in preference for sending cheques straight to the public. The technique is known as ‘Helicopter Money’.
The term ‘Helicopter Money’ was popularised when Ben Bernanke was Chairman of the Federal Reserve because he had written a paper on it when he was studying in college as a way that could have avoided the recession in the 1930s. The term was first used by Nobel Laureate and famed economist Milton Friedman in the 1960s, but may now be put into practise.
