The Pound is slipping mildly lower in early trade on Wednesday, extending losses for a fourth straight session. The Pound US dollar exchange rate settled in the previous session -0.05% lower at US$1.2436 after data showed he UK economy was heading for its worst recession in living memory.
At 07:15 UTC, GBP/USD is trading -0.05% at US$1.2431 ahead of the closely watched US private sector payroll report.
UK Government To Scale Back Fiscal Support?
The Pound is struggling to gain ground after data showed that the number of coronavirus deaths in the UK has now passed Italy. With a death toll of 29,427 the UK is now the sickest county in Europe. This will exert pressure on the UK government, which is already heavily criticised for its handling of the coronavirus crisis, potentially leading to a more drawn out easing of the lockdown measures. Those measures which are protecting the public are also devastating the UK economy.
Lloyds Bank revealed that it lent more than £1 billion to small businesses on Monday, the first day of the governments bounce back loan initiative. The bank confirmed that over 32,000 small businesses applied for the scheme which aims to help firms weather the coronavirus storm.
However, there is growing speculation that the government could start to scale back its fiscal support. 6.3 million workers are currently on the UK’s furlough scheme.
Today UK construction PMI data will be in focus. Analysts are expecting activity in the sector top have declined sharply to just 22 on the index in April, down from 39.2 in March. This should be a low point for the sector as construction sites are expected to start reopening.
20 Million Private Sector Jobs Lost?
The US Dollar is advancing on a mildly risk off mood in the broader financial markets and as investors look ahead to the release of US ADP Private payroll report. Analysts are expecting a 20 million drop in private sector payrolls in April, by far the largest decline in history. To put this figure into context, it took 9 years for those same companies to create those jobs. A weak reading could unnerve investors and push the safe haven US Dollar higher.
