Sterling lost ground against major currencies on Wednesday despite the 330 Billion Pound bailout package by the British Government amid coronavirus pandemic.
Global financial markets are in turmoil as investors are dashing to cash out, selling what they can sell. GBP investors are in a panic as the Cable lost more than 1,300 pips in just nine days over recession fears. The Bank of England slashed interest rates from 0.75% to 0.25% on March 11 in a move to bolster the economy during the Coronavirus crisis.
UK’s economy has been hit hard by the Coronavirus outbreak, as the Government urges public to work from home where possible and avoid “non-essential” travels and mass gatherings, which have stalled economic activities across the country. An Interest rate cut from the Bank of England didn’t prove to be a support either as panic escalated among GBP traders as they were not convinced that it was “enough”.
With the virus outbreak continues to spread at a rapid pace in the UK, especially in London, Transport for London has reduced its services across the London network, and Prime Minister Boris Johnson warned that he is prepared to take “further and faster measures” to tackle the outbreak when necessary, which means London may face a lockdown as early as Friday.
A London lockdown may cause serious economic pain as the Centre for Economics and Business Research estimated that a day of lockdown in London would cost £495 million per day, and London is directly responsible for approximately 20% of UK’s GDP.
As of writing, global confirmed Coronavirus cases surpassed 210,000 with the number of deaths close to 9,000. The UK reported a massive increase of 676 cases in less than 24 hours and the total number of deaths reached 104.
The economic impact of COVID-19 on the UK’s economy has been significant as the British Pound lost more than 10% of value against the US Dollar in less than 10 days. GBP struggled against the Euro as EURGBP jumped above 0.92200 while GBPCHF dipped below 1.14300, a level not seen since September 2016.
On the technical side, GBPUSD on the 4-Hour timeframe has been following a downtrend since March 9. The price registered the lowest level of the period under study at 1.17519 on March 18. As of writing, the GBPUSD is hovering around 1.17800 with negative Moving Average Convergence Divergence and Momentum below the 100 level.
The pair is currently trading below the 50-period simple moving average with Relative Strength Index below 50 which supports the recent bearish price move. Resistance level lies at 1.32029 while the support level lies at 1.17519. Bears are trying to push the price below the 1.17000 level.
Written on 19/03/2020 by Bilal Jafar, FX Trainer at FXTM
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