Pound Sterling US Dollar (GBP/USD) Exchange Rate Rallies as US Jobless Figures Rise to Record High
The Pound Sterling US Dollar (GBP/USD) exchange rate rallied this afternoon, trading at around 1.7% higher. This left the pairing trading at around $ 1.2031.
The US Dollar suffered significant losses today after US jobless figures rose by a higher-than-expected 3.283 million in just a week.
The coronavirus pandemic caused over three million Americans to sign on for unemployment. This is a historically low figure, shattering the previous record in 1982 when around 700,000 people signed on for unemployment.
Some analysts have argued that this suggests the US economy is now in a recession.
Commenting on this, Ambrose Crofton, market analyst at J.P. Morgan Asset Management said:
‘The US economy has entered a recession. Initial claims – a measure of the number of new filings to receive unemployment benefits– rose to 3.283 million for the week ending 21 March. The speed and magnitude of the move higher highlights how US businesses have had to let staff go in the face of the sudden coronavirus shutdown.
‘Policymakers have moved to try to limit the extent of this recession: the US Federal Reserve has cut its key interest rate to zero and restarted quantitative easing at an aggressive pace; and Congress agreed a $ 2.2 trillion bill to support businesses and consumers. Despite this support, a neutral allocation to risk may make sense, at least until jobless claims and the infection rate have peaked.’
Bank of England (BoE) Willing to Take Further Action
Sterling was able to make gains against the US Dollar today after the Bank of England (BoE) left interest rates unchanged during this month’s scheduled meeting.
Rates were left at record lows and policymakers said they were willing to take further action to limit the economic damage of the coronavirus pandemic.
Thursday’s meeting followed two earlier emergency meetings which saw the BoE slash rates to record lows and ramp up its bond buying programme.
In its minutes, the bank said:
‘The spread of the disease and the measures that are likely to be needed to contain it have evolved significantly. The economic consequences of these developments are becoming more apparent and a very sharp reduction in activity is likely. Given the severity of that disruption, there is a risk of longer-term damage to the economy, especially if there are business failures on a large scale or significant increases in unemployment.’
Pound US Dollar Outlook: UK Emergency Coronavirus Bill in Focus
The US Dollar (USD) could suffer further losses against the Pound (GBP) on Friday following the release of February’s personal spending data.
If both personal spending and personal income in the US disappoints, it will leave the ‘Greenback’ under pressure.
Meanwhile, in the UK, MPs are expected to vote on an emergency coronavirus bill on Friday evening.
According to Health Secretary Matt Hancock, the bill is expected to allow ‘extraordinary measures’ never seen during peace time.
Sterling could be offered an upswing of support if the bill is passed in the House of Commons, which would cause the Pound US Dollar (GBP/USD) exchange rate to rise.
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