The Pound is extending gains versus the US Dollar after a solid run higher on Tuesday. The Pound US Dollar exchange rate surged 1.8% to close the previous session a US$1.1761 as investors cheered Federal Reserve action and US fiscal stimulus. The pair traded a wide range of US$1.1448 – $1.1801.
At 07:30 UTC, GBP/USD had advanced a further 0.5% at US$1.1822, close to the session high of US$1.1852.
Pound Advances Despite Business Activity Slump
The Pound surged across the board amid broad risk on sentiment in the previous session. A strong risk appetite allowed the Pound to jump as Britain started lock down and as data showed that activity in the UK’s dominant service sector collapsed in March. The service sector PMI plunged to 35.7, the lowest level on record.
Today investors will continue monitoring coronavirus developments as the number of daily coronavirus deaths spike to 89, bringing the total to 424.
UK inflation data is unlikely to attract much attention given that it is for February, before coronavirus really impacted the UK economy.
US Dollar Eases As Stock Market Sees Most Gains In Over 10 years
The US Dollar eased across the board in the previous session as risk sentiment improved throughout the financial markets. The mood improved considerably as senators struck a deal on a huge fiscal stimulus package to help alleviate the economic impact that coronavirus will have on the economy. Lawmakers still need to vote on the deal.
As investors moved out of the safe haven dollar, they brought back into riskier assets such as the US stock market, which enjoyed its best day of gains in over a decade. Market participants are expecting the US Congress to agree on a deal to pour $2 trillion into the US economy through bailouts to struggling companies and aid payments to individuals. The Dow Jones jumped 11.3%, in its biggest one-day rally since 1933 during the Great Depression.
The surge in risk appetite came despite US PMI data revealing the steepest downturn since March 2009. The service sector PMI slumped to 39.1 for March, down from 49.4 in February and well short of expectations, as the initial impact of coronavirus on the US economy starts to show through.
Today durable goods data is due to be released. However, it is data from February, meaning it is not expected to attract much attention. It is already considered out of date.