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GBP/USD Under Pressure as Markets Worry About Brexit, Negative Rates by BOE

GBP/USD Under Pressure as Markets Worry About Brexit, Negative Rates by BOE

Posted Wednesday, May 20, 2020 by
Arslan Butt • 1 min read

On Wednesday, the Pound continues to trade cautious against the US dollar, after making 0.5% gains in the previous session as worries mount about Brexit-related uncertainties and the possibility of the BOE introducing negative interest rates. At the time of writing, GBP/USD is trading around 1.226.

Recent positive headlines about economies reopening and promising news about the coronavirus vaccine have been unable to propel GBP/USD higher, unlike other riskier currencies, as traders worry about the outlook of the British economy in the aftermath of the pandemic. Britain is expected to experience the worst economic downturn in modern history due to the coronavirus, and although it is getting ready to resume economic activity in the coming weeks, recovery could take much longer.

Meanwhile, with the latest round of trade negotiations between Britain and EU failing to make much headway, worries about a post-Brexit trade deal have resurfaced once again and weigh on the Pound. There are also rising fears that the extended downturn could force the BOE to cut interest rates below the current rate of 0.10% and take them down to below zero in the near future in order to help prop up the economy.

GBP/USD has performed poorly in comparison with other G10 currencies that have made higher gains so far this month on account of an improvement in the risk appetite in markets. Analysts expect the Cable to continue trading under pressure over the next couple of weeks, at least until the upcoming EU summit, where there could be some more developments surrounding Brexit.

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