gdp-gross-domestic-product

The British pound is flat against the US dollar on Wednesday.

The worst US GDP reading in 12 years broadly met expectations and was not a big burden on the dollar. FX traders have their sights set on tonight’s Federal Reserve interest rate decision.

Positive results from a trial of Gilead Science’s Remdesivir to treat the coronavirus saw stock markets jump but the British pound was unable to capitalise.

British pound to US dollar rate was down by 5 pips (-0.04%) to 1.2415 as of 2pm GMT.

GBP/USD attempted a rally up to 1.25 but fell short by 20 pips and rolled over to only find support back at 1.24. Yesterday the exchange rate was flat at -0.08%, leaving it slightly higher on the week at +0.34%.

British pound unable to capitalise on market mood

Gilead said that a stage 1 trial of their antiviral drug Remdesivir had shown that it helps improve symptoms of patients in the early stages of infection. Since there are no known treatments, cures or vaccines to the coronavirus, a lot of emphasis is being placed on the drug based on early positive results from doctors using it.

The United Kingdom as an outwardly facing global economy should benefit from the boost to public confidence that a treatment is available, however this was not reflected in the pound which ran into sellers ahead of the key 1.25 figure.

Dollar steady after GDP, before FOMC decision

The US economy contracted by 4.8% year-over-year in the first quarter according to preliminary estimates released on Wednesday. That was worse than the -3.5% some were expecting but roughly in line with consensus. It is the biggest decline since the fourth quarter of 2008 at the peak of the financial crisis.

The takeaway in forex markets was that the GDP data would not affect the Federal Reserve monetary policy decision later today scheduled for 18:00 GMT. The dollar was largely unaffected since the Fed is more likely add to or pullback from money-printing programs based on projections for the current quarter in the height of the pandemic and government-enforced lockdown.