The pound steadied against a stronger dollar on Wednesday amid a broader selloff in global stock markets as data showed factory activity across the world contracting sharply due to the coronavirus pandemic. Manufacturing gauges tumbled across the globe, with Purchasing Managers’ Index (PMI) surveys in Asia, the eurozone and the UK underscoring the widening damage wrought by the pandemic that has infected more than 700,000 people, upended supply chains and led to city lockdowns worldwide.
Data showed output from Britain’s manufacturing sector shrank at the fastest pace since the eurozone debt crisis in March as the spread of coronavirus led to spiralling delays and hammered business confidence.
By 1449 GMT, the pound traded flat to the dollar at $1.2420, reversing losses made earlier in the day. It jumped 1% against a broadly weaker euro to trade at 87.92 pence. Sterling’s movements over the last few weeks have primarily been dollar-driven, with recent gains against the greenback due to an easing of demand for the US currency as central banks pump billions of dollars of liquidity into markets.
GBPUSD opened at 1.2364 and rose to an afternoon high of 1.2432 before dropping to close at 1.2392
GBPEUR opened at 1.1267 and climbed to 1.1375 in the afternoon, before dipping slightly to close at 1.1344
The dollar advanced on Wednesday, with markets bracing for what is shaping up to be one of the worst economic contractions in decades as the world copes with the coronavirus pandemic. Markets were spooked after US President Donald Trump’s dire press briefing late Tuesday, where he warned Americans of a “painful” two weeks ahead in fighting the coronavirus even with strict social distancing measures.
White House coronavirus coordinator Deborah Birx displayed charts demonstrating data and modelling that showed an enormous jump in deaths to a range of 100,000 to 240,000 people from the virus in the coming months.
In afternoon trading, the US dollar index was up 0.5% against several currencies - including the Australian, New Zealand and Canadian dollars, along with the South African rand - were down close to 1% versus the dollar. Against the safe-haven yen, however, the dollar was down 0.4%
EURUSD opened at 1.0974 and fell across the day, closing near a low of 1.0907