Pound to US Dollar Exchange Rate Weak on Coronavirus Developments
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit its worst levels in two months today. Coronavirus jitters have throttled the Pound (GBP) this week and sent demand for safe havens like the US Dollar (USD) surging.
Since opening this week at the interbank level of 1.29, GBP/USD has been trending with a downside bias. Due to the US Dollar’s strong rebound, the pair has shed all of last week’s gains already.
This morning, GBP/USD touched on a low of 1.26. This was the worst level for the pair in over two months, since July. At the time of writing, GBP/USD has rebounded just slightly from those lows and trends in the region of 1.27.
Today’s data has had little influence on the Pound to US Dollar exchange rate outlook. Upcoming data may also have limited impact, as investors focus on the global coronavirus pandemic.
Pound (GBP) Exchange Rates Fail to Find Much Support in UK PMIs
Today saw the Pound (GBP) rebound just slightly from its worst levels, as markets calm from UK coronavirus developments this week. Yesterday saw the UK government ramp up restrictions to limit the spread of the virus, and there are warnings that more restrictions are possible.
However, the Pound was still unappealing overall and has been unable to recover this week’s losses.
Today’s UK PMI projections from Markit had no major impact on the Pound outlook. While manufacturing was a little better than forecast, Britain’s key services sector saw more slowdown than analysts expected.
According to Duncan Brock, Group Director at CIPS:
‘With the announcement of more curbs on movement, it’s impossible to guess how these firms can continue for the rest of the year and the knock-on effects of job losses will be brutal.
With the weakest overall optimism since May when the recovery started, the fragility of the economic recovery has been revealed.’
US Dollar (USD) Exchange Rates Soar on Coronavirus Safe Haven Rally
This week has seen fears of a coronavirus second wave solidify, as cases worsen across the globe.
As a result, investors have been moving away from assets correlated with risk, and into safer investments. This has led to a surge in demand for the safe haven US Dollar (USD).
While concerns persist about US economic and political uncertainty, the safe haven rush has been so notable that the US Dollar has benefitted notably from it.
According to Analysts at Commerzbank, rising infections in the Eurozone and UK are part of the market panic:
‘At present the market is once again dominated by concerns about a second wave of infections, above all in Europe, meaning that the Dollar is in demand again’
Pound to US Dollar (GBP/USD) Exchange Rate Remains Driven by Coronavirus Developments
The Pound to US Dollar (GBP/USD) exchange rate has been dominated by developments in the coronavirus pandemic so far this week, and that movement is only likely to continue.
Investors will be hesitant to buy the Pound (GBP) much so long as speculation persists that the UK could see stricter restrictions or even a second national lockdown.
On top of this, the safe haven US Dollar (USD) could keep climbing on safe haven demand as the global pandemic worsens again.
On the other hand though, the US Dollar’s appeal as a safe haven may be limited as well.
The US outlook remains filled with economic and political uncertainties. The coronavirus has hit the US economy hard, and the nation is drawing ever closer to its 2020 Presidential Election.
Tomorrow will see the publication of UK distributive trades data and US jobless claims, which could also influence the Pound to US Dollar (GBP/USD) exchange rate.