The Fed double or even tripling down on its monetary easing measures has been a saviour for the British pound, which has made some headway against the US dollar since touching 35-year lows last week.
Riskier currencies have been in demand on Tuesday before the likely passing of a multi-trillion dollar coronavirus support package in the United States, lowering demand for the buck as a haven.
GBP/USD was up by 182 pips (+1.58%) to 1.1730 with a daily range of 1.1509 to 1.1801 as of 4pm GMT.
Having broken through 1.15 in late trading yesterday, the currency pair powered higher to come just short of 1.18 before pulling back but remaining green for the week to date at +0.72%.
British pound benefits from improved global sentiment
Economists had already concluded the UK was likely headed for a recession and the Bank of England has slashed interest rates to a record low of 0.1% in preparation.
Nonetheless, data from purchasing managers was still surprisingly bad on Tuesday. The Flash Composite PMI for March showed a reading of 37.1 -a sharp turn for the worse from the 53.0 reported in February and a new record low. The composite reading covers both services and manufacturing sectors. A reading above 50 signifies expansion while a reading below 50 shows a contraction.
Dollar hit by Fed actions, reduced haven demand
Data from the United States was slightly better than that of the UK but was still dismal. The discrepancy probably just reflects the later spread of the coronavirus into the USA than the UK. Since the surveys were taken, cases in the United States have jumped and many states have reacted by declaring a state of emergency.
The flash reading for the US Markit February services PMI was 39.1, down from 49.4. It was the shock decline in the February reading for this data that made US investors stand up and pay attention to the real economic effects of the coronavirus. Markets fell off a cliff and have not looked back since.