- GBP/USD bears catch a breath following the heavy fall on Wednesday.
- Fears of the widespread virus outbreak, insufficient measures by the UK government, BOE weigh on the Cable.
- The US dollar continues to draw strength from its reserve currency status amid risk-off.
- A $1.3 trillion dollar stimulus package from the US is expected to be rolled out.
Following the show of bears, with more than 500 pips of declines, the GBP/USD pair registers 1.0% losses to 1.1480 while heading into the London open on Thursday. The Cable earlier slumped amid concerns of widespread coronavirus (COVID-19) outbreak as well as expectations that British policymakers and the BOE refrain from bold measures to combat the deadly disease.
To confront the flue-related disease, the UK government announced closures of schools, colleges and nurseries from Friday while also pushing for more tests. Further, the Tory government is now left with no option to extend the Brexit deadline as it canceled the EU-UK talks in London which were planned to start from Wednesday.
According to the UK Health Ministry, the death toll rose to 99 on Wednesday vs. Tuesday’s 67, reporting a 48% jump. “As of 18 March, 56,221 people in the UK had been tested for coronavirus. The number of tests has been rising from just over 1,000 a day at the end of February, when testing began, to more than 6,000 per day by mid-March,” said the BBC.
The BOE has also announced rate cuts and buying of commercial papers while the Chancellor’s multi-billion pound package was considered as a large plaster.
During Thursday, the ECB and the RBA carried forward the rush to combat coronavirus with multiple measures while the US $1.3 trillion package is still in the pipeline.
Considering this, the trade sentiment remains volatile with the US 10-year treasury yields heavy around 1.25% whereas most stocks in Asia flash losses.
Investors will now keep eyes on the global measures to counter the negative implications of the virus to gauge the near-term direction. However, the US dollar is likely to keep benefiting from the same due to its safe-haven status.
Technical Analysis
Although RSI seesaws in the oversold area, further downside can’t be denied amid the broad weakness of the pair as well as the abnormal current time. That said, sellers will wait for the fresh low under 1.1450 for fresh entry whereas a one-week-old falling trend line near 1.1970 acts as the immediate resistance.
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