Last Week: US Becomes the New Coronavirus Epicentre
On Monday, the Pound US Dollar (GBP/USD) exchange rate slumped as demand for the safe-haven Dollar picked up once again.
As the US became the new epicentre for the coronavirus pandemic, investors flocked to safety and braced themselves for a long period of uncertainty.
Sterling took another hit at the start of the week after ratings agency Fitch downgraded the country’s sovereign debt rating.
Added to this, the currency was left dampened after Prime Minister Boris Johnson confirmed he had contracted coronavirus.
Safe-Haven Status Buoys US Dollar (USD)
The pairing continued to edge lower on Tuesday after both business and consumer confidence slumped due to the virus. Although confidence has likely fallen further as the data was collected before the British government announced the nationwide lockdown.
Risk appetite continued to slump as investors grew concerned over the number of coronavirus cases increasing rapidly in the US.
The Dollar continued to buoyed by its safe-haven status mid-week, as the world seemed to be staring at one of the worst global economic contractions for decades.
Sterling slipped as PMI data showed manufacturing output and new orders slumped at the fastest rate since mid-2012. Added to this, business optimism plummeted to a series low.
Historic US 113-Month Employment Expansion Comes to an End
The pairing continued to slide on Thursday after US data revealed that thanks to the coronavirus pandemic the number of Americans filing for unemployment jumped to a record high for the second week running.
The number of jobless claims topped six million, following last week’s 3.3 million rise as over 80% of Americans are now under lockdown.
The Dollar continued to make gains on Friday after risk sentiment suffered yet again following the abrupt end to the US economy’s historic 113-month employment expansion.
US non-farm payrolls showed that employers cut 701,000 jobs in March, sending the US unemployment rate from 3.5% to 4.4%
Pound US Dollar Outlook: Coronavirus and Global Recession Fears in Focus
Looking ahead to next week, the Pound (GBP) is likely to suffer losses against the US Dollar (USD). Global recession fears will continue to send traders flocking towards traditional safe-haven currencies.
Added to this, Sterling could suffer losses following the release of March’s construction PMI data. If the constructions sector follows earlier services and manufacturing surveys, plummeting into contraction, GBP will slide.
Meanwhile, on Tuesday the Dollar could rise as risk sentiment suffers further losses following the release of February’s job openings.
If JOLTS job openings reveal the number of openings fell in February before the coronavirus pandemic really hit the US jobs market, sentiment will slide.
Wednesday: Will the Fed’s Minutes Offer Markets Support?
Wednesday could see the US Dollar edge slightly lower if the Federal Open Market Committee (FOMC) minutes offer markets some support.
The US Federal Reserve’s minutes could offer some support, and highlight the support the bank is offering to help offset damage from Covid-19.
If the minutes boost risk appetite slightly, the Pound could claw back some losses against the ‘Greenback’.
Will Weak British GDP Dampen Sterling Sentiment?
Meanwhile, on Thursday the Pound could give up any gains made following a slew of British data.
Sterling sentiment will be hit if both manufacturing and industrial production slump further than expected in February.
Added to this, Sterling will suffer further losses if data shows GDP stagnated, or plummeted into contraction in February.