Pound US Dollar (GBP/USD) Exchange Rate Steady, UK Spring Budget Uplifts Sterling

March 11, 2020 – Written by John Cameron

GBP/USD Exchange Rate Rangebound, UK Receives ‘Largest Fiscal Boost in Decades’

The Pound US Dollar (GBP/USD) exchange rate held steady today after Rishi Sunak, the newly-appointed Chancellor of the Exchequer, released the Spring Budget for the next five years.

Sarah Carlson, a Senior Vice President at Moody’s, was upbeat about the new budget, commenting:

‘The fiscal stimulus announced by Chancellor Rishi Sunak in today’s budget should help to support economic growth given the economic headwinds created by Covid-19.’

Chancellor Sunak pledged £30bn of extra spending to protect the UK’s economy against the coronavirus. He also added that this was the largest fiscal boost in decades.

Today also saw the Bank of England (BoE) slash its interest rates from 0.75% to 0.25% in an emergency measure to protect the British economy against the negative impact of Covid-19.

However, following today’s downbeat UK growth report for January, which flat-lined at 0% month-on-month, we could see some of the Pound’s gains begin to fade.

Rob Kent-Smith, the Head of Growth at the ONS, commented:

‘The economy continued to show no growth overall in the latest three months… The dominant service sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment and education.’

US Dollar (USD) Steadies as Fed Rate Cut Odds Continue to Rise

The US Dollar (USD) has continued to suffer from rising odds of a second interest rate cut from the Federal Reserve.

Reuters Analysts Lindsay Dunsmuir and Ann Saphir commented:

‘The escalating coronavirus outbreak is giving the U.S. Federal Reserve a policy headache like never before: how to judge the potential impact on the economy in the absence of reliable data on how fast the flu-like illness is spreading across the United States.’

Now that the US looks increasingly vulnerable to Covid-19’s outbreak, investors are flocking to riskier assets like the Australian Dollar and New Zealand Dollar instead.

Today’s release of the US inflation figure for February failed to boost the ‘Greenback’. The month-on-month gauge confirmed consensus at 0.2%, while the year-on-year report beat forecasts and rose to 2.4%.

However, as Covid-19 continues to dominate headlines US Dollar (USD) investors are remaining cautious as the US economy looks increasingly set for a downturn in the first quarter.

GBP/USD Outlook: Could Positive US Jobs Data Boost the ‘Greenback’?

US Dollar (USD) investors will be awaiting tomorrow’s publication of US jobs data. Any signs of unemployment falling this month would boost the USD/GBP exchange rate.

The GBP/USD exchange rate will continue to be driven by coronavirus developments. If it continues to show signs of further weakening the British economy we would likely see the Pound begin to fall.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts