The greenback has nosedived after weekly US jobless claims tumbled by much more than expected. It reinforces the concern investors have about the damage the coronavirus is doing to the American economy.
The pound rose after the Bank of England opted not to cut interest rates any further and left the bond-buying program at the same size of £200 billion.
GBP/USD was up by 257 pips (+2.15%) to 1.2138 with a daily range of 1.1744 to 1.2129 as of 5pm GMT.
The currency pair had been meandering around 1.19 but then spiked up to above 1.21 to a new 1-week high. Week-to-date gains now stand at a tidy 4.23%.
British pound gains after Bank of England leaves rates steady
The Bank of England had already slashed interest rates twice in the lead up to today’s meeting so another cut was never really on the cards. The central bank left UK interest rates at 0.1%, a record low – and avoided a move into negative interest rates.
Lower interest rates are, in more normal times a negative thing for a currency because a lower return is earned by holding cash in that currency. However given the current emergency scenario caused by the coronavirus – negative interest rates have been seen as a good thing for the longer term benefit they will have on the economy and financial system.
Dollar slumps after US jobless claims spike over 3 million
Jobless claims in the United States have risen by the most on record by 3.28 million. That’s much worse than the 695,000 in October 1982, the previous peak – or the financial crisis where claims peaked at 665,000.
The dollar had been acting as a haven for FX traders seeking the safety of cash and US Treasuries, but the extent of the hit to the US economy itself has to date been underappreciated. Many businesses have had to make layoffs to make it through the impact of travel restrictions and stay-at-home orders issued by State and City authorities throughout the United States.