The British pound is down against the US dollar on Friday after Mark Carney, Governor of the Bank of England warned the coronavirus will hurt the British economy in the coming months, again rising the spectre of a cut to UK interest rates.
GBP/USD was lower by 35 pips (-0.26%) at 1.2850 with a daily price range of 1.2847 to 1.2919 as of 2pm GMT. The currency had jumped higher in morning trade but failed to hold the 1.29 level and turned down to make new lows for the day and the lowest in three months. Weekly losses in the exchange rate were -1.01%.
BOE Governor Mark Carney said in a Sky News television interview that the coronavirus is slowing activity in the British economy. Carney said, “things are getting tight” in reference to financial conditions and that it was “hard to be precise about the magnitude and very importantly the duration” of the economic harm from the virus” but that “the direction is down” on the economy.
On Friday, the first British citizen died of the coronavirus as a passenger on the quarantined Japanese cruise ship. The timing of the coronavirus is tough for the UK economy, where confidence had just started to rebound in the aftermath of the general election and with the government currently working on the next budget for March 11.
On Friday US personal income rose 0.6% month-over-month in January, a bigger rise than the 0.3% expected and the 0.1% prior. But people weren’t, it appears in a mood to spend their higher income. Personal spending rose only 0.2%, down from 0.4% in December and below the 0.3% expected.
Economic data which is typically one of the biggest drivers of moves in forex markets is taking a backseat to fears over the potential economic consequences of the coronavirus. The economic data for the United States in January has been mostly upbeat prompted in part by trade tensions with China having died down. The data from February has looked more problematic, notably the contraction in the service sector according PMIs.