Good morning,
The pound has managed to hold the gains it saw last week through the Asian trading session; overall the recovery has so far reached 9.5% against the US Dollar after hitting a 35-year low due to the economic downturn caused by the coronavirus pandemic. After murmurs of parity against the euro started to creep back onto the lips of traders, the pound also recovered over 6.5% to comfortably hold above 1.11.
This has come as a surprise to some analysts, however; on Friday, credit rating agency Fitch downgraded the UK economy and bumped it from an AA to AA- rating. This follows the Government’s plans to increase spending and make more money available to the population to combat the negative impact that Covid-19 is having on the country. Fitch is questioning Boris Johnson’s Governments ability to meet the obligations of the bonds as total spending has now reached 5.3% of the UK’s GDP. This, coupled with Michael Gove saying the measures could last for a “significant period”, does not give the pound a bright outlook.
On the other hand, however, there is an argument that GBP is now on the rise and can continue to make significant gains as traders return to markets to seek riskier, but more profitable, investments with more confidence after global central banks introduced combative measures.
Furthermore, the UK is holding out for the anti-body test which can give the Government an indication on how to fight the virus and kick start the process of getting day to day life back to normal.
Have a good day,
Author: Jack Nicholls, Relationship Manager
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