GBPUSD continues to move lower as investors were not convinced of the UK laissez-faire approach to Covid 19. Yesterday, sterling was able to temporarily retrace some of its losses follow the UK Gov. update where Sunak pledged a further £350bn to help businesses. However, it nose-dived today to its lowest level since the October 2016 flash crash. Barring that low, GBPUSD is trading at its lowest level since March 1985. Sterling losses were further compounded as cases of Covid 19 grew by circa 35% overnight from 1950 to 2626 and rumours that a London shut down is imminent. The move is in tandem with a strong demand for the global safe haven currency, the US Dollar. The US Dollar index (vs a basket of currencies) reached a 3-year high as the fear of Covid 19 grows.
Analyst from Nomura on have stated that they consider that there is “the potential for GBP to reach, what is in our view, it’s Hard Brexit equilibrium of 1.15-1.18.”. In the meantime, according to the WSJ, a group of asset managers have told new BoE Gov Bailey that financial markets should close for two weeks. The call was held with senior executives from Blackrock, JP Morgan, Vanguard and Bank of New York Mellon. Sterling continues to be under pressure as the Government measures to combat Covid 19 are consider a light touch in comparison to its European counterparts whilst the prospect of a hard Brexit is being considered.
Tonight, the UK government announced that English schools will close to all but the children of key workers and the most vulnerable children from Friday.
Data is almost irrelevant right now as the market continues to focus on the measures to contain Covid 19 and the support to business and individuals. Currency markets will continue to react based on its assessment of these measures and how they will impact their respective economies.
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