The Pound is pushing northwards versus the US Dollar on Wednesday for a fifth session in six. The Pound settled on Tuesday marginally lower at US$1.2425.
At 07:15 UTC, GBP/USD has jumped 0.3% at US$1.2462, towards the top end of its daily trade range as amid a new strategy from the UK government for testing and reporting coronavirus and ahead of the US Federal Reserve monetary policy announcement.
Pound Advances As Covid-19 Curve Continues To Flatten
The Pound is pushing higher in a broad risk on environment. Tuesday’s government death toll showed 552 coronavirus fatalities, evidence that the curve continues to flatten. However, according to the Office of National Statistics, the real death toll, including deaths in the community is significantly higher. Heath Secretary Matt Hancock said that deaths will now include fatalities in the community, such as care homes.
Matt Hancock also revealed that more people will be eligible to test for coronavirus. In addition to more testing, he also indicated that a coronavirus contact tracing app will be a key part of lifting the UK lock down. This is expected to be in place by mid-May. The UK government is under increasing pressure from businesses and Conservative MP’s to begin unfreezing the UK economy. Although the latest traffic data from Google points to the UK taking itself out of lock down.
US GDP To Contract -4%
The US Dollar is heading lower ahead of the US GDP reading and the Federal Reserve monetary policy announcement. Of the two events the GDP has most potential to move the market as the Fed are not expected to move on interest rates or extend their bond buying programme. During the coronavirus crisis the Fed hasn’t waited for the monthly meeting to adjust policy.
The first quarter GDP will include two weeks at the end of March when the US was in lock down. Investors are bracing themselves for the GDP to show a contraction for the first time in six yeas with analysts forecasting a -4% quarter on quarter decline. This would be the largest contraction since 2009, a reflection of the early impact of the lock down paralyses to the economy. A weak reading could stoke fears of even worse contraction in the second quarter of the year.
Investors will look to the Fed for guidance as to how deep the Fed sees the economic contraction and for how long the Fed intends to keep rates at 0.
