Volatility shows no signs of letting up. The Pound has jumped versus the US dollar in early trade on Friday. It is paring losses from the previous session, after the Bank of England cut interest rates again and boosted its bond buying. The Pound versus US dollar exchange rate closed on Thursday down 1% at US$1.1487 around its 35-year low.
At 07:30 UTC, GBP/USD is rebounding, trading 2.5% higher at US$1.1761. This is at the upper end of the daily trading range.
Pound Looks To Chancellor For Additional Support
The Pound rallied versus most on its major peers on Thursday but not the mighty US Dollar. Pound investors cheered a move by the BoE to cut interest rates in a second emergency cut in just over a week.
Andrew Bailey, the new BoE Governor had only been in the job 3 days when he cut interest rates from 0.25% to just 0.1%. This is the lowest level that rates have been in the central bank’s 325-year history. Additionally, the BoE announced that it would increase the number of UK gilts that it held by £200 billion.
The move comes after the outgoing BoE Governor, Mark Carney slashed rates by 0.5% and introduced measures to support business and individuals through the coronavirus economic hit.
Today, Chancellor Sunak is expected to announce a vast rescue package for UK companies and their workers. The key message from both the BoE and the UK Government is that they will do whatever it takes to support the UK economy and financial system through the coronavirus hit.
US Dollar Eases As Risk Tone Lightens
The US Dollar is easing lower on Friday after surging across the week. The greenback has benefited across the week from strong risk aversion leaving investors desperately seeking the safe haven dollar.
However, there are worrying signs emerging in the US economy too. The US jobless claims surged 70,000 to 281,000 in mid-March as coronavirus triggers layoffs. Treasury Secretary Steve Mnuchin warned that the deadly virus could propel unemployment to 20%.
The overall risk tone in the global financial market is lighter on Friday, helping to lower demand for the dollar. The US stock market is pointing to a positive start.
