- UK GDP -2% in first quarter vs -2.5% forecast
- UK gov. sees coronavirus crisis fallout continuing to October
- Federal Reserve Chair Jerome Powell to speak later
- GBP/USD +0.3% at US$1.2298 at 07:45 >> Real time exchange rates
The Pound is pushing higher in early trade on Wednesday, snapping a two-day losing streak. The Pound US Dollar exchange rate settled on Tuesday -0.6% at US$1.2261 after striking a thee week low.
At 07:45 UTC GBP/USD is trading at +0.3% as it attempts to break above US$1.23 after a barrage of better than forecast UK data and ahead of a speech by Federal Reserve Chair Jerome Powell.
The Pound is advancing after data revealed that the UK economy contracted at the fastest pace since the financial crisis in the first three months of the year, as the coronavirus outbreak forced the county into lockdown.
The economy contracted -2% in the first quarter. This was better than the -2.5% contraction forecast by analysts. The dominant UK service sector suffered a record decline. However, economists are expecting an even deeper downturn in the second quarter.
The data comes after the Pound was the worst performing G10 currency in the previous session after Chancellor Rishi Sunak announced that the government furlough job retention scheme would continue until October. This suggests that the government sees the coronavirus crisis continuing well into the autumn. Concerns over the impact on the UK economy raised investor expectations that the Bank of England will cut interest rates again. BoE policy maker confirmed these expectations, saying that further easing would be likely.
The US Dollar is on the defensive on Wednesday as investors look ahead to Federal Reserve Chair Jerome Powell’s speech and amid swirling speculation that the Fed could consider adopting negative interest rates.
After US consumer prices dropped -0.8%, President Trump weighed into the negative interest rate debate, encouraging the Fed to go down the negative rates route. When Fed Chair Jerome Powell provides an economic update later today in a live streamed event, one of the questions will almost certainly be on negative rates. So far, other Fed policy makers have pushed back against negative rates given that it would hit the financial sector hard.
The US Dollar also lacked momentum after the top US health official warned over opening the US economy too early. His comments served as a reminder of the uncertainties that the US economy faces amid the coronavirus crisis.
