News that the Bank of England has agreed temporarily to lend money to the government to fight the spread of COVID-19 if funds cannot immediately be raised from debt markets had little impact on UK bond and currency markets.
While the government typically borrows money direct from the markets via bond issuance, its measures to increase spending to protect the economy potentially means billions of dollars in extra borrowing at a time when bond markets have become volatile.
The BoE said any government borrowing from its Ways and Means facility would be repaid by the end of the year.
Andrew Mulliner, a portfolio manager at Janus Henderson Investors, said the BOE's step is temporary in nature and solves the problem of raising a lot of cash very quickly via traditional debt management operations through a market that is accustomed to a steady flow of issuance.
"We see this step as more sensational at a headline level than any significant step into the sort of monetary financing that invites comparisons to Zimbabwe," Mulliner said.
Against the dollar, the pound extended gains and was up 0.4% at $1.2425, a one-week high. While the pound has generally held firm against the dollar in recent days, it has failed to break above the $1.25 line.
Markets are waiting for US jobless data where economists are forecasting weekly jobless claims of 5.25 million, which would mean claims over just three weeks totalled a staggering 15 million.
Domestic data offered little support. Gross domestic product rose by 0.1% in the December-February period, the Office for National Statistics said, weaker than a median forecast for growth of 0.2% in a Reuters poll of economists.
Versus the euro, the pound struggled to crack through the 87.50 pence levels with some analysts remaining bearish about the British currency's prospects against the euro as some European countries such as Austria and Denmark plan their exit strategies from a lockdown while the United Kingdom is planning on extending a similar shutdown.
"I think their actions are likely to improve sentiment towards the euro as investors realize that the first countries to take steps to deal with the virus will be the first ones to get back to some semblance of normality," said Marshall Gittler, head of investment research at BDSwiss.
On a weekly basis, the British currency was poised for a tiny marginal gain of about 1%, aided by a broader drop in currency market volatility.
Expected swings in the British currency for one-month maturities dropped for a third consecutive week and held near a one-month low.
The recent swings of the British currency has left the pound just shy of a 2020 high on a trade-weighted valuation basis at 78, according to Bank of England data.