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Forex – GBP/USD Rides UK Fiscal Stimulus Optimism to 1-Month Highs

2 Mins read
imageForex13 hours ago (Mar 09, 2020 01:26PM ET)

(C) Reuters.

By Yasin Ebrahim – The pound rose to one-month highs against the dollar amid expectations the Federal Reserve will slash rates to 2015 lows, while growing optimism that new fiscal stimulus to boost economic growth measures will be including in the upcoming UK budget also underpinned sterling.

“There’s a lot of optimism about the impact of this week’s UK budget, which appears likely to be coordinated with a round of interest rate cuts,” said Marshall Gittler, head of investment research at BDSwiss Group.”The rate cuts don’t necessarily have to be negative for sterling if the market believes that they’re likely to bring about faster-than-expected growth.”

GBP/USD rose 0.67% to $1.3135.

The pound has also been supporting by growing bets the Federal Reserve will be forced to deliver big rate cuts to cushion the impact from the novel coronavirus compared to its peers like the Bank of England, which has limited room to ease.

Goldman Sachs (NYSE:GS) forecast that the Fed will slash interest rate by 50 basis points when policymakers gather on March 17-18 and again at their April 28-29 meeting, to a range of 0% to 0.25%, which was last seen in 2015.

But unlike the Fed, the Bank of England has less room to maneuver.

Analysts at Goldman Sachs expect the Bank of England will announce a base rate cut of 50 basis points in April, while UBS believes the BoE will ease by a more modest 25 bps.

Still, the overarching moves for cable could be dominated by Brexit after the UK and EU kicked off trade talks last week.

Forex – GBP/USD Rides UK Fiscal Stimulus Optimism to 1-Month Highs

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