The Pound is staying depressed, close to its two-week low in early trade on Wednesday. The Pound US Dollar exchange rate settled on Tuesday at US$1.2294 after shedding -1.1% as the outlook for the Pound darkened.
At 07:15 UTC, GBP/USD was trading -0.1% lower at US%1.2278 as UK coronavirus deaths pass 17,000 and the focus remains on how long lock down will continue.
Boris Johnson & BoE Governor Fear Early Easing Of Lock Down
The Pound is extending losses for a third straight session amid concerns over an extended UK lock down. Divisions have emerged among UK ministers over when to start easing lock down restrictions. On the one hand the “doves” fear a second wave of infections if restrictions are eased too early. Meanwhile, the “hawks” fear of economic collapse should the lock down continue for too long. With the daily death toll remaining stubbornly high at 868, the Prime Minister appears to be siding with Mat Hancock, the Health Secretary and the doves.
Bank of England Governor Andrew Bailey has also warned the UK over lifting the lock down too early.
Brexit is also weighing on the Pound. A senior government official has said that Boris Johnson intends to keep the Brexit transition period end date at 31st December.
Today, UK inflation data is the highlight of the UK economic calendar. Analysts are expecting consumer prices to increase at 1.5% year on year in March, down from 1.7% in February. This would be well below the Bank of England’s 2% target. However, the data could be ignored by investors who are more interested in “activity” data recently.
Dollars Safe Haven Properties Still In Demand
The US Dollar is trading broadly higher versus peers as, President Trump, in sharp contrast to the UK, announced that there are 20 states ready to be re-opened whilst he also is ready to sign a bill preventing immigration into the UK for 60 days.
A stabilisation in the price of oil has offered little relief to investors who continue to seek out the greenback’s safe haven properties. The sharp fall in equities and oil suggests that investors expected the global economy to remain weak for some time.