The pound collapsed below $1.22 for the first time in more than five weeks on Thursday. According to Wednesday’s data, Britain’s economy fell by a record of 5.8% in March due to coronavirus. Negative tidings caused the sterling’s decline.
The eurozone’s reports on first-quarter GDP data is due on Friday. Traders are awaiting it for clues about the depth of the recession.
Meanwhile, the Australian dollar plummeted down by 0.3% to $0.6437 as the jobless rate rose to a five-year high. New data showed unemployment increased by 594,300 in the country in April. It seems Australia’s economy needs more monetary and fiscal easing to help it overcome the crisis.
What about the U.S. dollar?
The dollar climbed up by 0.2% to 100.37 against a basket of its rivals. It traded below a three-week high of 100.44 by the end. The currency is surging towards a three-week high. Stock markets weakened after Fed Chairman Jerome Powell spoke against negative interest rates. As a result, concerned investors moved on the greenback, causing its rally.
U.S. President Donald Trump’s comments further boosted the dollar. Trump stated that he supported a strong dollar. He also warned that the recovery could take some time as the recession is worse than any since World War II.
Meanwhile, Jerome Powell rejected the idea of using negative interest rates, even though U.S. stock futures pointed to a third consecutive session of losses. European stock markets also declined by more than 1% on Thursday.
Investors have lost some of their optimism after Powell’s statements – noted Raffi Boyadjian, the senior investment analyst at XM. As the governments lifted some lockdowns, traders became hopeful a V-shaped recovery from the crisis would be possible. It seems more dubious now.
Powell urged more fiscal stimulus to support the U.S. economy. But the ongoing tensions between Democrats and Republicans suggested that additional stimulus is unlikely to materialize immediately, according to the chief investment officer at UBS Global Wealth Management, Mark Haefele.