The GBP/USD has remained flat with traders rushing to safe-haven currencies as a result of coronavirus economic fallout. This left the exchange rate trading at $1.2321 with the US dollar posting some gains on Wednesday thus reversing the previous session’s risk investment upswing.
GBP edges lower because of COVID-19
At the beginning of this week, risk sentiment rebounded following some optimism that the number of COVID-19 cases was slowing in New York and Europe. This resulted in the US dollar suffering its worst dip in two weeks despite signs of infections leveling in New York. The GBP edged lower as the effects of the coronavirus continue to be felt.
The extension of the lockdown in the UK because of the coronavirus could derail any more gains of the exchange rate. Although there is positive news with PM, Boris Johnson reported to be stable but Dominic Raab the deputy party leader has had to face the difficult decision of extending the coronavirus lockdown. Besides the lockdown, the country is also grappling with a shortage of ventilators and cases are expected to peak in the next 10 days.
On the other hand, the EU has failed to agree on a stimulus package while questioning the Brexit deadline. The risk-sentiment in the market is inflated by the fact that the US is seeing a surge in the number of infections.
Going forward the USD could move higher than the GBP if the risk-sentiment continues to drop. With the US reporting unemployment growing the risk appetite will be affected and result in the GBP/USD pair plunging as trades scamper and seek safe-haven currencies.
Following the decline in the exchange rate’s March run-up 50% Fibonacci retracement and the bullish MACD indicators, it is likely theta buyers are closer to a resistance trend line of $1.2407. The pair has established a support level of $1.2327. It will be interesting to see how the exchange rate fairs as the coronavirus ease.