In times of the worst panic, there is only one winner, the US Dollar. Safe haven drives and funding distress sent the Pound US Dollar exchange rate to the lowest level in 35 years last week at US$1.1409, before bouncing higher at the end of the week on extensive stimulus from the BoE, UK Government and central banks across the globe.
The pair fell over 5% for the second consecutive week. However, the Pound is extending its recovery in early trade on Monday.
At 06:45 UTC, GBP/USD is trading at US$1.1695, slightly off from the high of US$1.1715 reached overnight.
Pound Picks Up From 35 Year Low
The Pound tumbled 1800 pints versus the US Dollar over the past 10 days. Coronavirus events have developed at breakneck speed and volatility across the financial markets has been high. With the number of coronavirus cases and deaths increasing by the day, the potential economic impact grows.
The BoE cut interest rates to a record low 0.1% and announced an additional £200 billion gilt purchases. The UK Chancellor has been working on new plans daily to cushion the UK economy, businesses and workers from the coronavirus fallout.
As the government imposes stricter restrictions on the public, such as closing pubs, restaurants and gyms the economic impact becomes all the starker.
Measures such as £330 billion rescue package and an unprecedented move to pay the wages of workers to prevent them being laid off are just two of the measures put forward by the Chancellor last week. This week the government could look to prop up the struggling airline British Airways and offer more help to the self-employed. The coordinated support from both BoE and UK Government is helping to underpin the Pound at the start of the new week.
US Dollar Pulls Back Ahead Of Congress Vote
The Federal Reserve cut interest rates to zero at the start of last week, whilst also announcing $700 billion of new quantitative easing in an unscheduled move. Yet despite these huge easing moves by the Fed, the dollar surged thanks to its safe haven properties.
Investors were selling out of everything to hold US Dollar cash, whilst businesses are hoarding dollars for fear of tougher times ahead. This move appears to be easing at the start of the new week as investors await a key vote in Congress over a £1 trillion bailout package.
The US is ramping up its response to coronavirus as the number of cases escalated sharply over the weekend,
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