GBP/USD Exchange Rate Trading at a One-Week High Following US Jobless Figures
The Pound to US Dollar (GBP/USD) exchange rate remains buoyed this afternoon after yesterday’s US jobless figures stoke fear of an impending US recession.
At the time of writing the GBP/USD exchange rate is trading at around $1.2271, up roughly 0.7% from this morning’s opening rate.
US Dollar (USD) Dented by Record Increase in Unemployment Claims
The US Dollar (USD) remains on the back foot today as the currency continues to reel from yesterday stunning US unemployment figures.
According to the US Department of Labour, initial jobless claims rocketed up by 3.2 million last week as workers were hit by massive coronavirus driven layoffs.
— Diane Lim (@economistmom) March 26, 2020
This blew the previous record increase of 700,000 out of the water and has stoked considerable fears about the state of the US economy during the coronavirus crisis.
The majority of analysts believe that a US recession is now unavoidable, in spite of the huge $2.2 trillion stimulus package the government has put together to helping cushion the impact of widespread lockdowns throughout the country.
Francis Scotland, portfolio manager and co-director of global macro research at Brandywine Global, comments:
‘The U.S. is in a recession. The speed of the surge in unemployment claims reflects back on the “shelter in place” and orders from various governments to reduce activity in order to limit the epidemic. In one sense, it is a government-mandated recession.’
Economists warn that the US is on track to quickly rise to 10% from a current low of 3.5% and even once the coronavirus crisis passes it will take some time for many of these jobs to return.
Pound (GBP) Upside Dented as Boris Johnson Tests Positive Coronavirus
At the same time, the Pound (GBP) has found its gains capped this afternoon in the wake of news that Prime Minister Boris Johnson has tested positive for then coronavirus.
The PM is reported to have developed mild symptoms over the past 24 hours and will be self-isolating in Downing Street.
— Guardian news (@guardiannews) March 27, 2020
While Johnson is expected to continue working from home, the news has spooked some GBP investors with the PM being the first world leaders to acknowledge they have tested positive.
GBP/USD Forecast: US Payrolls to Collapse in March?
Looking ahead, the Pound to US Dollar (GBP/USD) exchange rate may move higher again next week as market brace for the publication of the highly influential US non-farm payrolls.
With initial claims pointing to skyrocketing unemployment through the second half of the month, March’s payroll figures are expected to report the first contraction in employment growth in almost a decade.
Alongside a spiraling number of new cases of coronavirus infection being reported in the US, any upside in the US Dollar looks to be limited.
Meanwhile, in the UK the final publication of this month’s PMI figures could temper demand for the Pound, with business sector activity likely to be revised down as the latest data takes into account the UK’s full lockdown.