Jason Heppenstall

Pound Remains Weak as Boris Johnson Recovers from Virus

4 min read


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Pound/Euro (GBP/EUR) falls to around €1.13
Pound/US Dollar (GBP/USD) fluctuates around $1.25
Euro/US Dollar (EUR/USD) rises to $1.11
Pound/Australian Dollar (GBP/AUD) weakens to AU$1.94

Throughout April the Pound has struggled against its rivals, despite a general weakening of the US Dollar. One of the main reasons for this was the uncertainty surrounding the health of UK Prime Minister Boris Johnson, who was admitted into intensive care after contracting Covid-19. This, and the ongoing economic damage being caused by the nationwide lockdown saw markets remaining generally wary of the Pound, with even risk-sensitive currencies such as the Australian Dollar outperforming it.

When Mr Johnson emerged from hospital there was no corresponding rebound in the Pound as investors remained focused on the extent of the economic damage to the UK economy. At present, market players are awaiting news of how and when the lockdown will end, with most major banks forecasting a general strengthening of Sterling over the coming weeks.


The GBP/USD exchange rate was relatively calm throughout April, fluctuating between $1.22 and $1.26 before ending the month at $1.25.

Unlike March, there were no big shocks for Sterling during April, with the Bank of England keeping rates steady at their record low of 0.1 percent, and no further fiscal announcements from either the UK or the US. To reassure markets, the US Federal Reserve further pledged a massive $2.3tn in loans to cushion the blow to businesses of the economic turmoil.

In general, there was a weakening of the US Dollar over the month as investors saw stock markets rising and hoped a sense of normality might soon return to markets.

Any sense of normality, however, was cut short when President Donald Trump seemed to blame China for the spread of the Covid-19 virus and announced plans to economically punish the Asian giant.

At the same time some dreadful economic figures were emerging around the world, with the US revealing a slump in economic growth which would amount to an almost 5 percent contraction on an annual basis. This, combined with an extra 26.5 million unemployed Americans, has severely damaged output in the world’s biggest economy.

Another casualty of Covid-19 is the oil market, with the price of US crude oil crashing below $20 a barrel. This has had a knock-on effect for Canada, which produces a lot of oil for sale to the US, with the result that the Canadian Dollar was unable to take advantage of Sterling’s weakness, hovering around the CA$1.74 mark for most of April.


Over April the Australian Dollar steadily strengthened as some risk appetite returned, with GBP/AUD showing a pronounced devaluation as a result.

By May 1, the Pound Australian Dollar exchange rate was $1.94, or almost 5 percent lower than it was just a month before.

The economic news coming out of Australia was not as bad as analysts had feared, with unemployment falling in March and the labour participation rate rising slightly. Furthermore, manufacturing figures were healthier than in other major economies, proving perhaps that the Australian economy is benefitting from the Chinese economy coming back online.

If the economic figures remain upbeat this month, we can expect to see AUD continue to win back more of its recent losses.


Not many FX traders were expecting the European Central Bank (ECB) to cut interest rates any further in April, but there was a general feeling of disappointment that the proposed economic stimulus package was not more far reaching.

In particular, markets were expecting the ECB to follow the US Fed’s approach to buying junk bonds, thus directly supporting businesses; instead the ECB merely proposed more refinancing options for banks.

Despite this, the Euro remained generally strong throughout the month, with GBP/EUR slipping to €1.13 by the start of May (reminder, it was riding high at €1.20 back in February).

With signs that the peak of the Covid-19 virus has now passed in Europe, whether the Euro remains strong over the course of May could be down to economic data more than anything else. After such widespread disruption to the Eurozone economy it could be a while before we are aware of the full scale of the damage, and even ECB President Christine Lagarde has stated that ecostats are “guesswork” at present.


With so much damage having been caused to the global economy by the virus outbreak traders are now looking ahead to the reopening of national economies to get direction. If the process of transition goes smoothly, we can expect to see currencies appreciate in those regions that experience the swiftest rebound.

Bear in mind however that any return to normality will likely see the US Dollar weaken and risk sensitive currencies such as the Australian Dollar strengthen. Placed somewhere in the middle, the British Pound is also poised to go higher over the next few weeks, according to forecasts by the major banks.

Final thoughts

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