GBP/USD Exchange Rate Outlook Strong despite Mixed Movement This Week
Investors are hesitant to buy the Pound Sterling to US Dollar (GBP/USD) exchange rate too much this week. However, the Pound (GBP) outlook is fairly bullish and markets predict it could keep climbing against the US Dollar (USD).
Since opening this week at the level of 1.3584, GBP/USD has seen mixed movement. GBP/USD dipped yesterday before rebounding and edging above the week’s opening levels today.
At the time of writing on Tuesday morning, GBP/USD is trending near the level of 1.3622. GBP/USD remains around half a cent below last week’s 2-year-best of 1.3699.
The US Dollar has been benefitting from risk-aversion and safe haven demand. However, there is potential for markets to calm in the coming week or so.
Pound (GBP) Exchange Rates Climbing as Pound Outlook Gradually Improves
The Pound started this week off on a bearish note. Britain’s coronavirus and Brexit situations has kept Sterling a fairly risk-correlated currency, so the Pound was weaker at the beginning of the week amid risk-aversion.
However, some analysts note that the Pound’s long bets continue to become more bullish. This indicates that markets expect the Pound to climb as Britain’s outlook recovers this year.
Bets are becoming more bullish due to Britain’s coronavirus vaccine rollouts, as well as hopes that the nation will gradually adjust to a new post-Brexit life outside the EU.
These hopes are helping the Pound to edge higher as investors are a little more willing to take risks again today.
US Dollar (USD) Exchange Rates Slip as Markets Await Yellen Speech
In what may be familiar to many investors, markets are anxiously awaiting an upcoming speech from Janet Yellen. The ex-Federal Reserve Chairwoman is the US Treasury Secretary nominee, for the incoming Joe Biden administration.
It is expected Yellen will make the argument for more fiscal spending to support the US economy.
The safe haven US Dollar is weakening in anticipation. More fiscal policy in the US could make markets more confident and bolster market appetite for risk-taking.
According to Paul Donovan, Chief Economist at UBS:
‘Yellen … will attempt to sell US President-elect Biden’s $1.9 trillion fiscal stimulus plan (arguing that low interest rates allow a big fiscal stimulus),
If the growth rate generated by government investment in infrastructure or people exceeds the cost of borrowing, it is a worthwhile exercise.’
Pound to US Dollar (GBP/USD) Exchange Rate Could Recover if Markets More Willing to Take Risks
The Pound outlook is improving as markets bet for the undervalued currency to eventually recover. Meanwhile, the US Dollar outlook could be in for even more losses if markets become more optimistic about global growth.
While the US Dollar has already seen a lot of weakness lately, its bearishness may not be over any time soon.
For now, markets are keeping a close eye on the upcoming speech from US Treasury Secretary nominee Janet Yellen. If the Joe Biden administration will be more spending-happy than expected, risk-taking could rise further and the US Dollar could see fresh losses.
Meanwhile, the Pound could mount a more solid recovery if Britain’s outlook shows more signs of improvement.
Markets will be keeping a close eye on Britain’s vaccination schemes and progress.
UK data due later in the week, including retail sales and PMI stats, could also influence the Pound to US Dollar (GBP/USD) exchange rate.