The Pound Sterling managed to maintain a relatively strong this week and owes its stability to the Bank of England’s decision to drop interest rates to a record low.
The Pound performance has remained strong despite the harrowing situation in the market particularly the wave of disruption in the financial markets caused by the coronavirus pandemic. The Sterling owes its strong run to the fact that the Bank Of England made the notable interest rates adjustments. The rate dropped to a 0.1% record low.
The Pound has been affected by the coronavirus pandemic like many other global currencies. In fact, it hit a 3-decade low about a week ago at around the same time that the U.S started to report rising cases of coronavirus infections at an alarming rate. The last two emergency announcements that the BOE made revealed that interest rates have dropped by 65 basis points. This effectively brought down the interest rate to 0.1% which is an all-time low.
The Pound reacts to the interest rate slash
The above chart demonstrates the bullish performance of the GBP/USD chart over the past four days. In other words, the Pound Sterling has been growing stronger against the U.S dollar and that is partly due to the BOE’s decision to slash interest rate to a historic low.
The GBP/USD pair kicked off this week’s bull run from a weekly low of 1.1447 on Monday, to Friday’s impressive high at 1.2463. This is a significant jump, especially for such a period. However, this highlights the GBP’s path to recovery after the major bearish downturn that it experienced in the second week of March, which coincides with the rising concerns over the COVID-19 epidemic. The BOE’s decision to slash interest rates has therefore contributed to the Pound’s recovery after its previous bear run, indicating that sentiments are once again in its favor.
There are other factors that have contributed to the GBP/USD’s rally due to negative sentiments over the U.S dollar. The greenback has been taking a hit against stronger currencies due to the heavy impact of the coronavirus concerns on the U.S market. Investors have been rushing to put their money in safe havens thus the dollar sell-offs.