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  • Fed cuts policy rate by 50 basis points in an emergency move.
  • Fed says coronavirus poses evolving risks to economic activity.
  • US Dollar Index slumps toward the 97 handle.

The GBP/USD pair shot higher in the last minutes and gained more than 50 pips after the US Federal Reserve announced a 50 basis points cut to its policy rate in a surprise move. As of writing, the pair was trading at 1.2825, adding 0.6% on a daily basis.

Fed rate cut weighs on USD

Citing risks posed by the coronavirus outbreak on the economic activity, the Fed said it lowered the federal fund rates to 1%-1.25% range. “The FOMC is closely monitoring developments and will use its tools and act as appropriate to support the economy,” the Fed said and noted that the vote was unanimous in favour of the cut.

FOMC Chairman Jerome Powell will be delivering a statement at 1600 GMT. 

The US Dollar Index, which tracks the USD’ performance against a basket of six major currencies, fell sharply on this announcement and was last down 0.5% on the day at 97.03.

Technical levels to watch for