GBP/USD sinks to 1.22 as COVID-19 deaths jump in last 24-hours

GBP/USD is under immense pressure as the spread of COVID-19 weighs on the prospects of a UK economic recovery. The government's original plan to control the spread of the virus by, effectively letting it spread, had deterred investment in the UK leading to an exodus in the pound. The UK’s chief science adviser suggested allowing the coronavirus to spread to build immunity, which left the UK population to go about business as usual, essentially losing critical time to control the initial spread of the virus and potentially bringing forward the peak of infections sooner than later. 

On Sunday, Matt Hancock, the UK secretary of state for health and social care, stressed that achieving herd immunity to Covid-19 is not a stated policy and said “in the coming weeks,” people over the age of 70 will be told to self-isolate. However, This the World Health Organization guidelines recommends that everyone, regardless of age, practice social distancing.  “What we will do is listen to all the credible scientists and we will look at all the evidence,” Hancock said. “Herd immunity is not our goal or policy, it’s a scientific concept.”

COVID-19 deaths jump in last 24 hours

Since the government has tried to implement such a strategy, a total of 53 people in the UK have now died after testing positive for the coronavirus, Health Secretary Matt Hancock has said. This is a rise of 18 deaths in a 24-hour period. Making the announcement in the House of Commons, Health Secretary Matt Hancock called the coronavirus pandemic "the most serious public health emergency that our nation has faced for a generation". Subsequently, GBP fell under more pressure to test 1.22 the figure, making a low of 1.2202.

The government will argue that 'we are in unchartered territories', but the lack of conviction from the powers to be is creating a panic on the streets and driving the population to take their own precautions. Government ministers have said they’ll promote self-isolation but there is concern that the population will grow tired of it and will stop participating in it.

UK government switching tact

However, the Department of Health announced that as of 9am on Monday, the number of UK coronavirus cases had risen to 1,543. As a result, the government is facing increased pressure to declare a clearer and more unified strategy for combating the virus, signalling that it may begin unveiling its strategy in the coming days. Speaking in the first of the newly announced daily press conferences on the outbreak, Prime Minister Boris Johnson said the number of coronavirus cases in the UK could double every five or six days without "drastic action". The PM has told Britons to avoid pubs, clubs, restaurants and theatres and to only make essential journeys in the "national fightback" against coronavirus.

"Today, we need to go further, " the PM said.

BoE measures to combat COVID-19 toll on UK economy 

Andrew Bailey officially takes over today from Mark Carney has the governor of The Old Lady. The consensus amongst observers is that he is well equipped for the job at hand and earlier this month, Bailey sought to reassure MPs that he can handle the pressure, invoking his work at the Bank during the financial crisis. “I led many of the operations that the Bank did during the crisis – it was anything but slow-moving, so I think I can say that I have quite a strong history of doing things very quickly,” he told the Treasury Committee.

Among the first decisions, Bailey will have to now make is whether to cut again, and/or relaunch a quantitative easing (QE) bond-buying programme. Today, in his first move, the Bank of England said it will be offering US dollar repo ops with 84-day maturity in week commencing March 16.

The BoE has already slashed its main rate from 0.75 per cent to 0.25 per cent in an emergency move last week, so a rate cut so soon is unlikely, and will only be symbolic if done for there is only so much that can be achieved by rate cuts alone to the effective lower bound. As seen in the latest move y the Federal Reserve yesterday, while the injections form central banks are welcomed, they are not enough to instil confidence back into the markets. 

Bailey has already met the chancellor Rishi Sunak to discuss the response to the virus and told MPs that the Treasury and Bank “must act in a coordinated fashion,” with small businesses at the heart of a coordinated strategy. We could expect to see an expansion the loan scheme the Bank unveiled last week which it said should support more than £100bn of lending to smaller firms – yet, with such social distancing, and not knowing how long we will have to live under these conditions, how long is a piece of string?  As containment measures become more draconian, companies may need more than that.

Guardian reveals chilling secret Public Health England (PHE) briefing

The Guardian reported yesterday that, "the coronavirus epidemic in the UK will last until next spring and could lead to 7.9 million people being hospitalised, a secret Public Health England (PHE) briefing for senior NHS officials reveals."

The article reveals that he document, seen by the Guardian, was "the first time health chiefs tackling the virus have admitted that they expect it to circulate for 12 more months and lead to huge extra strain on an already overstretched NHS...It also suggests that health chiefs are braced for as many as 80% of Britons becoming infected with the coronavirus over that time."

GBP/USD levels

The prospects for the UK are extremely worrisome and in an age where the dollar attracts investment, with those seeking out US treasuries at times of market panic, we could see the pound heading back to the so-called "flash crash" lows of in October 2016, when the pound briefly fell sharply to $1.15 against the dollar before rapidly rebounding. It is worth noting that the pound has not traded regularly below $1.20 since 1985. 1.22 will be the first test until 1.2090 support and then 1.1950s.