The GBPUSD pair rose by more than 100 basis points as traders on broad US dollar selloff. The US dollar index, which measures the value of the dollar against a basket of currencies declined by more than 1%. This is after the Federal Reserve announced a new round of monetary policy to stimulate the US economy. The new move will see it buy unlimited assets, including risky corporate debt.
There were two big stories from the UK. First, a nationwide lockdown started earlier today. The move was announced by Boris Johnson, who was being criticized for his response to the crisis. This is as the number of Coronavirus infections rose to above 6,000.
The next big news came from IHSMarkit, the research company. The data showed that the composite PMI dropped to a record low of 37.1 in March. This was after rising by 53.0 in February. The drop was primarily because of the services sector whose PMI dropped to a record low of 35.7 in March. This sector is important to the UK because it is responsible for more than half of the GDP. The manufacturing PMI also dropped to a three-month low of 48.0.
With the country being in lockdown, I expect the PMI to drop to another record low in April. Most importantly, I expect the output to start improving in May, as people return to work.
Brexit is another thorn in the flesh. As the Coronavirus pandemic continues, I expect the country to have a challenge meeting its December 31st deadline to hammer a deal with the EU.
Looking at the hourly GBP to USD pair, we see that it has been on a downward trend for a while. The pair made lower swings on March 18, March 20, and yesterday. The pair is now at attempting to cross the important resistance level shown in green below. I expect the pair to be bullish if it moves above the resistance of 1.1720. If it does, the next level to watch will be the Friday high of 1.1934.