Sterling and FTSE 100 – News, Prices and Analysis:
- GBP/USD bounce into the weekend looks unconvincing.
- UK government expected to announce another fiscal package.
GBP/USD Recovery Boosted by US Dollar Weakness
The British Pound is currently trading around 1.1850 against the US dollar, nearly four-and-a-half big figures higher than Thursday’s multi-decade spike low. Sterling remains inherently weak as the spread of coronavirus continues unabated, while yesterday’s emergency interest rate cut and GBP200bn QE program highlights the UK government’s concerns over the economic outlook for the country. After such a savage sell-off, the British Pound may be benefitting from position squaring, or dip-buying, which may leave the pair vulnerable to further sell-offs. The US dollar traded at, then rejected a multi-year high (103.85 on DXY) yesterday, aiding in cable’s recovery, but the US dollars status as the safe-haven of choice remains undiminished.
Later today, the Chancellor of the Exchequer Rishi Sunak, is expected to announce a fresh fiscal package to help boost the UK economy. Talk is the Chancellor will announce national insurance and income tax breaks, with a wage subsidy also mooted, in what has been described as one of the biggest state interventions since the Second World War.
If GBP/USD is to climb further, 1.2000 looks a reasonable upside target which may see the pair pause for breath. After such wild moves, minor resistance areas become less effective as points of entry or exit, especially when volatility, using the ATR indicator, remains at a three-year high. The spread of the coronavirus will continue to drive price-action and with London likely to go into lockdown soon, further negative headlines could see GBP/USD turn lower again.
GBP/USD Daily Price Chart (September 2019 – March 20, 2020)
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