GBP appreciated against the USD in the second half of March 2020, following a momentary fall in the first fortnight. The pound fell to its lowest level since 1985, with a w-o-w decline of 10% on 18th March. The pound began its fall after the Bank of England slashed interest rates by 0.5% to 0.25%, a record low – in a bid to prop up the economy. Besides, this was also a reflection of the UK economy’s unique exposure to the disruptions ripping through the global economy, driven by the ongoing coronavirus pandemic.
Nevertheless, the sterling rebounded in the latter part of March and continued to appreciate in the first three weeks of April. Between 23rd March and 23rd April, the GBP appreciated 8% against the USD, with an improvement in the global investor sentiments.
Market speculators project that the recovery of the sterling in the near future would depend on the announcement of an extension to the timeline for a new trade deal with the EU. The negotiators from both sides have until June to agree on the foundation of a “Canada-style trade agreement”, with the aim to complete negotiations by the end of 2020. However, due to the coronavirus crisis, the Brexit negotiations have seen limited progression.
