GBP/USD Exchange Rate Slides to Five-Week Low as Market Sentiment Deteriorates
The Pound to US Dollar (GBP/USD) exchange rate opens today’s session on the back foot, as risk-off trade sees investors favour the safe-haven ‘Greenback’.
At the time of writing the GBP/USD exchange rate is trading at around $1.2196, down roughly 0.5% from this morning’s opening rate.
US Dollar (USD) Bolstered by Risk-Off Trade
The US Dollar (USD) is appreciating this morning as the appeal of the safe-haven currency is bolstered by souring market sentiment.
This downbeat mood comes amidst renewed tensions between the US and China and fears of a new trade war as Donald Trump once again took to Twitter with threats of tariffs in response to Beijing’s handling of the coronavirus outbreak.
As I have said for a long time, dealing with China is a very expensive thing to do. We just made a great Trade Deal, the ink was barely dry, and the World was hit by the Plague from China. 100 Trade Deals wouldn’t make up the difference – and all those innocent lives lost!
— Donald J. Trump (@realDonaldTrump) May 13, 2020
Trump’s outburst comes hot on the heels of comments from Federal Reserve chair Jerome Powell on Wednesday, in which he warned the US faces a ‘prolonged recession’, which combined with suggestions from the WHO that the coronavirus ‘may never go away’, has scuppered hopes for a V-shaped rebound in the global economy.
Jim Reid Global Head of Credit Research at Deutsche Bank, comments:
‘We just about managed to cope with a downbeat assessment from Fed Chair Powell but couldn’t after additional evidence that the US/China relationship is souring further.
‘This [Trump’s tweet] was followed by China Global Times headlines saying that China is “extremely dissatisfied” with the possibility of the US sanctioning or otherwise punishing China over the coronavirus epidemic and would look to retaliate and were “mulling punitive countermeasures on US individuals, entities and state officials”.’
Pound (GBP) Slips amidst Concerns over the UK Coronavirus Outbreak
Meanwhile, the Pound (GBP) is on the back foot this morning as the UK wrestles with the highest coronavirus death toll in Europe.
This has seen the UK fall behind its European neighbours in reopening its economy, with Boris Johnson only slightly easing the UK’s lockdown yesterday.
Further weighing on Sterling sentiment are concerns over the funding of the government’s job retention scheme after it was extended to October, with observers speculating it will be financed by tax rises.
GBP/USD Forecast: US Jobless Claims in Focus
Still to come today we have the latest weekly jobless report from the US, set to be published later this afternoon.
The release could see the Pound to US Dollar (GBP/USD) exchange rate recoup some ground as economists are forecasting another massive increase in unemployment to add to the 30 million American’s who have already lost their jobs during the coronavirus crisis.
Meanwhile, the conclusion of the latest round of Brexit talks is likely to be the main focus for GBP investors in the tail end of this week.
This is likely to see Sterling struggle as the UK and EU are widely expected to remain at loggerheads over the terms of their future trade relationship, stoking fears of a no-deal Brexit as a lack of progress could see the UK government pull out of talks in June.