Pound US Dollar (GBP/USD) Exchange Rate Tumbles to Lowest Level Since 1985

March 19, 2020 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Tumbles to Lowest Level Since 1985

Pound Sterling US Dollar (GBP/USD) Exchange Rate Falls to Multi-Decade Lows

The Pound Sterling US Dollar (GBP/USD) exchange rate continued to trade lower today although was left flat following the release of disappointing US labour market statistics. This left the pairing at around $1.1626.

Traders continued to sell off the Pound in favour of the US Dollar on Thursday as the coronavirus pandemic continued to weigh on market sentiment.

The pandemic sent the Pound to its lowest levels against the ‘Greenback’ in more than three decades, and over eight days of trading the pairing has tumbled more than -12%.

GBP/USD has not been this weak since 1985, and against the Euro (EUR) the Pound did not fare much better, touching a fresh 11-year low.

Coronavirus fears weighed on Sterling after the British government tightened restrictions further and announced the closure of schools across the country.

Some analysts believe Sterling will slump further due to concerns with the country’s current account deficit and post-Brexit trade uncertainties.

According to Morten Lund, senior FX strategist at Nordea, GBP has further to fall and could hit $1.10 and parity against the Euro.

Lund added:

‘I’ve been very negative on sterling throughout all this and I don’t think this general market sell-off is over. There are not many out there that want Sterling as a reserve currency, and at the moment everyone wants to be long safe assets including Dollars.’

However, the Dollar suffered some losses after data revealed US jobless claims were higher than expected for the week ending 14 March.

The rising number of Americans applying for unemployment adds to signs the coronavirus pandemic will have a significant impact on the US workforce.

Yesterday: GBP/USD Plummets to Lowest Level Since 1985

The US Dollar extended its gains on Thursday, putting the currency on its largest increasing run since 1992 against a basketful of peers.

Demand for the Dollar remained high today despite a further liquidity injection from central banks across the world.

USD rose to its highest level since 1985 against Sterling, and to 17 and 11 year highs against the Australian and New Zealand Dollars respectively. The US currency made significant gains as investors continued to dump riskier assets.

Commenting on this, Manuel Oliveri, a currency strategist at Credit Agricole in London said:



Sterling suffered significant losses on Wednesday, and commenting on this, Ulrich Leuchtmann, head of FX and commodity research at Commerzbank said:

‘Sterling is in a very difficult situation - you don’t want any kind of extra risk in your portfolio. You might be positive about [Brexit] or not, but you knew you were taking additional risk, which is not required at the moment so there is a big motivation for dumping Sterling at the moment.’

Pound Dollar Outlook: Will Traders Continue to Flock to the Safe-Haven USD?

Looking ahead, the Pound (GBP) could continue to slump against the US Dollar (USD) over the course of the week.
If the British government introduce stricter measures to help slow the spread of the Covid-19 pandemic, spooked investors are likely to continue to flock to the ‘Greenback’.

Meanwhile, Friday’s US home sales data could provide the Dollar with some added support.

If February’s existing home rebound after a disappointing January, it could cause the Pound US Dollar (GBP/USD) exchange rate to slump further.

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TAGS: Pound Dollar Forecasts