Pound to US Dollar Exchange Rate Climbs as Global Safe Haven Demand Softens
The Pound Sterling to US Dollar (GBP/USD) exchange rate is climbing on US Dollar (USD) losses today. Despite Friday’s news that US President Donald Trump had contracted the coronavirus Covid19, market demand for safe havens is already fading.
For much of last week, low safe haven appetite made it easier for GBP/USD to advance. GBP/USD climbed from 1.2741 to 1.2933 throughout the week, almost two cents.
This week so far, GBP/USD has only continued to climb. At the time of writing, GBP/USD is trending near a high of 1.2987. This is the best level for GBP/USD since it touched the level of 1.30 half a month ago.
A lack of strong supportive news for the UK outlook is limiting the Pound’s (GBP) gains. Meanwhile, the US Dollar outlook will remain focused on the health of US President Donald Trump and the US Presidential Election.
Pound (GBP) Exchange Rates Lack Drive amid Job Market Concerns
The Pound saw mixed movement yesterday, and continued to lack much drive today. Investors were hesitant to make big movements on the British currency, as it found some support on Brexit hopes, but was weighed by domestic coronavirus concerns.
Today, the Pound’s appeal is limited by concerns about the health of Britain’s job market as the nation faces a second wave of coronavirus infections.
Amid surging infections, UK Chancellor Rishi Sunak has defended the government’s recent stances and actions regarding economic activity and fiscal policy.
Sterling is being weighed concerns that more job losses will happen as the government furlough scheme ends. While there is concern the replacement scheme does not do enough to protect jobs, Chancellor Sunak said the government could not ramp up borrowing forever.
US Dollar (USD) Exchange Rate Slides as Safe Haven Demand Fades
Investors become more willing to take risks again yesterday evening, after US President Donald Trump was discharged from hospital.
Despite mysteries concerning the timeline and severity of his Covid19 illness, President Trump returned to the White House yesterday. It was perceived as a signal that all was well, and market panic calmed as a result.
While uncertainties persist, investors took the opportunity to sell safe haven currencies like the US Dollar again, in favour of riskier assets.
Safe haven demand is also weaker amid hopes for US fiscal stimulus. According to Lee Hardman, Currency Analyst at MUFG:
‘The increasing possibility of a “blue wave” (Democrat control of the White House and Congress) that would open the door for much-needed fiscal stimulus would be a welcome development for risk assets and could undermine the US Dollar,’
Pound to US Dollar (GBP/USD) Exchange Rate Awaits Fed Minutes
The Pound’s movement this week is mixed, amid a lack of surprising UK developments or data.
While some Brexit surprises or late-week data could influence the Pound, the GBP/USD outlook is most likely to be driven by the US Dollar this week.
The US Dollar remains sensitive to shifts in market risk and trade sentiment. As the US Dollar is a safe haven currency, it would of course advance in times of market uncertainty.
As a result, if US President Donald Trump’s illness worsens or US Presidential Election uncertainty intensifies, the US Dollar could climb again.
On the other hand, markets will be less eager to hold onto the safe haven US Dollar if the Democratic Party continues to make gains in polls.
The US coronavirus situation will remain influential as well.
Tomorrow’s Federal Reserve meeting minutes report could give markets a better idea of the Fed’s coronavirus outlook, which will be closely watched by Pound to US Dollar (GBP/USD) exchange rate investors.
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