US Dollar (USD) Holds the Upper Hand as UK ‘Freedom Day’ Approaches
As covid cases in the UK continue to rise, officials have revealed that some restrictions will remain intact from next week. Reopening uncertainty consequently creates headwinds for the Pound (GBP), while the US Dollar (USD) benefits from its safe-haven status.
At the time of writing, GBP is trading at USD$1.3851, virtually unchanged from this morning’s opening levels.
US Dollar (USD) to Climb Further as Coronavirus Hospitalisations Increase?
An increasing number of covid infections around the globe has seen a risk-off mood prevail at the start of this week, propelling the US Dollar higher.
Expectations that the Federal Reserve are moving towards tightening monetary policy also continue to underpin ‘Greenback’ support, as officials closely watch the market for inflation risks and other impediments to economic growth. The market focus will remain on Tuesday’s upcoming Consumer Inflation figures for clues as to further Fed action: June’s rate is expected to sit at 4.9%.
Going into Wednesday and Thursday, the semi-annual testimony of Fed Chairman Jerome Powell will be scrutinised likewise, for any indication of the central bank’s next move. On quantitative easing, the Fed has previously stated that it expects purchases to continue at least at the current pace until substantial further progress has been made.
British Pound (GBP) to Trade Low on Covid Fears, Slow Economic Recovery?
While failing to deter the Prime Minister from instating ‘Freedom Day’ on July 19, the UKs latest coronavirus figures have spread concern over whether the National Health Service is equipped to handle the inevitable wave of cases when restrictions are lifted.
The UK government faces criticism from politicians and health experts alike over the planned reopening, with Shadow Secretary of State Jo Stevens remarking that removing restrictions is ‘reckless at a time when infections are rapidly rising.’
Later in the week, Jobs and Inflation data are likely to drive GBP movement against its currency partners. Inflation is expected to rise by a healthy 2.2% and unemployment to hold at 4.7%, with 90-thousand more people in employment compared with last month.
If these figures are met, they are likely to reflect positively on the Pound. Sterling sentiment may be dampened, however, by ongoing Brexit disputes, as the UK faces up to a £40.8bn fine imposed by the European Union.