The Weakening GDP Pressures the Sterling
The sterling was under pressure in early European forex trading on Tuesday. The release of the final gross domestic product figures suggested that the contraction in Q1 was deeper than originally estimated.
The UK’s GDP fell by 2.2% in the first quarter of 2020 due to the Covid-19 outbreak. This was according to a revised estimate released by the Office of National Statistics on Tuesday.
Analysis revised this number downward from the previous estimate of a 2% decline.
A number of factors have weighed down the pound in forex. Primarily, it was the economic damage caused by the shutdown associated with the coronavirus. This includes the way the government has handled the outbreak.
There are worries about how Britain’s government will pay for its planned infrastructure program. This then followed Prime Minister Boris Johnson’s promise to increase spending. The prime minister is due to give a keynote speech on the topic later on Tuesday.
On Monday, Johnson said this is the moment for a Rooseveltian approach to the UK Specifically, he was referring to US President Franklin D Roosevelt’s ‘New Deal’ program. Its job-creating public works projects helped the United States recover from the Great Depression.
On top of this, is great uncertainty surrounding Britain’s trading relationship with the European Union. So far, they have not made much progress on agreeing on a trade pact.
Analysts at Danske Bank said that the most senior government official is considered a soft Brexiteer. He is now being replaced by the more hawkish David Frost, the UK’s chief Brexit negotiator.
Sterling and its Peers’ Movements
The sterling traded at $1.2280 GBP=D4 after sliding to a one-month low of $1.2252 on Monday. There were concerns about how Britain’s government would pay for its planned infrastructure programme. This added to the worries about its ability to seal a trade pact with the European Union.
GBP/USD fell 0.2% at 1.2276, just above the one-month low of 1.2252 on Monday. It was down almost 2% over the last week.
EUR/GBP was down 0.1% to 0.9133, after climbing to a three-month high of 0.9175 on Monday. It rose 1.6% in forex trading over the week.
The US dollar has seen demand as a safe haven, as the Covid-19 pandemic showed no signs of adapting. Given the lack of global solidarity, the worst is yet to come. This was a statement from Tedros Adhanom Ghebreyesus, head of the World Health Organization, at a briefing in Geneva Monday.
Additionally, US Federal Reserve Chair, Jerome Powell, was saying that, on Monday, the outlook for the world’s biggest economy is extraordinarily uncertain. It will depend both on containing the coronavirus and on government efforts to support the recovery.
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