GBP/USD Back Over $1.24 Post Fitch Downgrade

GBP/USD Back Over $1.24 Post Fitch Downgrade

GBP/USD slipped 0.3% lower to US$1.24 in early trade and has retained those losses across the morning session.

The Pound slipped as investors weighed up the impact of a ratings cut by Fitch late on Friday. The ratings agency cited the coronavirus impact and uncertainty over Brexit because the motive for cutting the UK’s rating from AA to AA-. Fitch predicted that UK GDP would drop 4% this year due to the pandemic related downturn. The rating agency was also concerned about the UK’s fiscal loosening stance amid its big spending plans to prop up the economy.

What next?

Whilst the united kingdom remains firmly on lock down, conflicting comments are leaving traders unsure of subsequent step, keeping the pound steady. On the one hand, reports suggest that the united kingdom might be on lock down for 3 months, with social distancing implemented until October. Should this be the case the hit to the united kingdom economy could greater than initially expected. 

On the opposite hand, comments by Neil Ferguson, a Professor at Imperial College advising the united kingdom government said that the united kingdom epidemic is slowing which antibody tests are subsequent step. His comments have raised hopes that the united kingdom might be back to figure sooner. 

Safe haven dollar strengthens as Trump extends social distancing 

The US Dollar has picked up at the beginning of the week, recouping a number of last week’s steep losses on the rear of a rise risk aversion. Trump extended the US social distancing guidance until the top of April after having previously said that the US would be open for business after Easter. His U-urn comes following dire projections from his advisers.

The broad expectation is that this could be over with by mid-May. there's definitely a sense that the markets have seen the worst. That said, volatility will remain for the nonce as infection rates still have the power to scare. 

Levels to observe 

GBP/USD jumped 7% across the previous week, learning from 35-year lows of US$1.1410 before closing the week at $1.2457. 

GBP/USD is consolidating those gains. On the 4 hour chart GBP/USD trades above its 50 and 100 sma, retaining the bullish trend.

Immediate support are often seen at $1.2313 (today’s low) before $1.2260 (100 sma) and $1.2750 (low 27th March).

Immediate resistance are often seen at $1.2466 (today’s high) before $1.2485 (high 27th March) and $1.2595 (200 sma).