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GBP/USD Forex Market Impacted by Rate Cut Decision

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  • US Markets Pointing Downward After Hopeful Tuesday
  • BoE Rate Cut to Curb Economic Impact
  • China Showing Signs of Positive Recovery

US markets rallied intensely on Tuesday to claw back some of the monumental losses from the disastrous start they made to the week. The S&P 500 had its best single-day performance in more than a year to regain massively, while the Dow Jones also produce a regain of over 1,000 points. This comes before opening on Wednesday as the Bank of England rate cut of 50 basis points appears to have shaken confidence in the British Pound.

Another Negative Turn after a Day of Positivity

Tuesday was something of a calm after the storm for markets in the US. This feeling was initially bolstered by American President Trump announcing plans for a payroll tax cut that would help support the people and the markets in turn. This news of stimulus support helped to boost markets back from the huge lows of the previous day. That rebound, as it turns out, may have been premature and short-lived.

As case numbers continue to rise across the US with now more than 1,000 confirmed, and National Guard troops drafted in to assist with a special containment zone in the New Rochelle area of New York, the markets have again taken a downward swing. Overnight, the Dow, S&P, and NASDAQ all pointed to early losses in the hundreds of points range. This would give back a large chunk of their recovery from the previous day.

GBP/USD Shaken by Rate Cut

Sterling has fallen this morning following the announcement from the Bank of England that they will follow their US counterparts in reducing interest rates by 50 basis points. A reduction had been widely expected although analysts had though that this may have come during the BoE scheduled policy meeting on March 26th. As it has transpired, they could not wait this long and instead announced the cut at the end of a special meeting yesterday. The surprise timing of the announcement also contributing to the Pound decline.

The bank also announced a new funding scheme to help small and medium-sized companies ride out the tough times and additional measures to ease lending restrictions on commercial banks. For the consumer and market in the longer term, this are seen as helpful and very important steps to help improve liquidity, outlook, and confidence.

China Beginning Recovery Provides Welcome Boost

Signs of positivity are on the horizon though as China continues to show signs of recovery across the country. President Xi Jinping visited the city at the center of the outbreak, Wuhan, for the first time yesterday. From there, he announced that the spread has been “basically curbed” and that a “strong signal to the entire country and the world that China is ascending out of the darkest moment amid the outbreak” had been sent. This may provide some comfort to the forex market and traders around the world, that brighter moments lay ahead.
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Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

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