GBP/USD edges higher as UK coronavirus deaths cross 10,000

The GBP/USD pair rose slightly as the market reacted to the rising number of coronavirus infections and deaths. In the UK, the number of confirmed infections rose to more than 84k while deaths crossed the 10,000 mark.

GBP/USD pair rises slightly

UK coronavirus infections rise

The number of people infected and dying from the coronavirus illness has continued to rise in the UK, and the situation could get worse. According to Sir Jeremy Farrar, the numbers will continue to increase unless the government adapted strategies for mass testing. He warned that the UK would record the highest number of fatalities in Europe.

Farrar is the respected head of the Wellcome Trust and a member of the government’s scientific advisory committee. The government’s response was also criticised by Sue Hill, the vice president of Royal College of Surgeons, and Dave Prentis, the general secretary of Unison.

The situation is the same in the United States, where Neel Kashkari warned that the current uncertainty and lockdowns would persist for about 18 months. Kashkari is the president of Minneapolis Fed and is a voting member of FOMC.

UK economy hit

The UK economy has been affected significantly by the current pandemic. Several companies, including Debenhams and BrightHouse, have moved into administration and more others could follow. The housing market has been suspended while banks have suspended their dividends.

The crucial services sector has been decimated. The latest data from Markit showed that the PMI dropped to 34.5, which is its lowest level ever recorded. The manufacturing PMI contracted to 47.8 in March after hitting its highest level in nine months in January. The country’s credit rating was also downgraded in March by Fitch.

In a shocking statement, Rishi Sunak said that the country’s GDP could drop by an unprecedented 30%. The unemployment rate is expected to rise to 4.7% this year from the current 3.8%.

The government has responded to the crisis by passing a £65 billion stimulus package to cushion the economy. The funds are significantly higher than the £42 billion that Gordon Brown provided in the past financial crisis. The government will use these funds to help companies, households, and self-employed cope with the ongoing shutdown.

The two main problems of this stimulus are that the funds will likely not be enough if the crisis continues for several more months. Also, there is a question on how the government will pay for the funds. Larry Elliot summarised the government’s dilemma as follows:

“The chancellor has a whopping cash flow problem. Locking down the economy in response to the COVID-19 pandemic means that tax revenues have dried up at a time when the state is promising to spend billions more on health, wage subsidies, small business grants and universal credit.”

GBP/USD technical outlook

On the four-hour chart, the GBP/USD pair has risen to 1.2480, which is a critical resistance level. The level is also slightly below the 61.8% Fibonacci Retracement level and close to the peak of the ascending triangle. If the pair moves above the current resistance, the next potential target will be the 1.2600 level.