The British pound in relation to the US dollar breaks the 1.2000 barrier and, as a result, was at its lowest level since 1985. The Bank of England stepped in again, cutting interest rates for a second time at a special meeting.
The Bank of England (BoE) lowered the main interest rate to 0.1 percent on 19 March. This is a continuation of the 50 basis points reduction from last week. As a consequence, the Bank of England interest rates fell to a record low. The institution's representatives explained that the spread of the epidemic and the measures taken to stop the virus could cause economic shock, but it should be temporary. The central bank has announced that it will increase its share in the British government and corporate bonds by £ 200 billion. It is worth mentioning that the next regular BoE meeting will take place on March 26.
Even before cutting rates, investors were getting rid of the British currency. The GBP/USD exchange rate crossed the 1.2000 barrier, falling to 1.1400. It was the lowest level since the 1980s. However, the GBP/USD currency pair has interrupted a series of declines after information that the UK is thinking about employee subsidies and freezing income tax payments in response to a pandemic economic shock, Telegraph reports.
On the other hand, the US dollar also interrupted a series of increases when fears arose that other US states could follow California and cause a recession in the world's largest economy. The governor of this state has issued a warrant to stay home until further notice. This is the most stringent measure in the US to limit the spread of the virus.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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