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GBP/USD Exchange Rate Pressured but Could See Fresh Gains as UK Vaccinations Ramp Up

GBP/USD Exchange Rate Knocked by Market’s Risk-Off Mood in Recent Sessions 

Despite hopes that Britain’s coronavirus situation will continue to improve, the Pound to US Dollar (GBP/USD) exchange rate is tumbling today. The safe haven US Dollar (USD) is benefitting from the markets risk-off mood. 

Last week’s GBP/USD movement was highly mixed. GBP/USD opened the week at the level of 1.3567 and touched on a January low of 1.3457 before rebounding to a fresh 2-year-best of 1.3699 later in the week. 

GBP/USD was unable to hold those best levels though, and closed the week a little higher in the region of 1.3583. On Monday, GBP/USD slipped again and at the time of writing is trending near the level of 1.3533. 

Still, some analysts believe the Pound (GBP) outlook could recover soon if Britain’s coronavirus situation continues to improve. 

Pound (GBP) Exchange Rates Lack Drive but Coronavirus Situation Slowly Improving 

Britain has seen soaring coronavirus infection rates since December. Even after a third national lockdown was introduced, infection rates remained high. 

Coronavirus infection rates finally started to show signs of improvement over the past week. However, this gradual improvement has not been enough to keep the Pound climbing. 

Higher demand for safe havens like the US Dollar has also limited the Pound’s appeal. 

Still, there is potential for the Pound outlook to improve soon. Analysts are already predicting Sterling will eventually recover as Britain’s coronavirus vaccine programs continue to expand. 

Britain’s coronavirus vaccination programme is being opened up to over-70s this week. 

US Dollar (USD) Exchange Rates Benefit from Risk-Aversion as Pandemic Rattles Markets 

While today is a US public holiday, the US Dollar continues its recovery rally today. 

Investors have been buying the US Dollar back from its lows since last week. This is a combination of corrective trade as well as higher demand in markets for currencies seen as safe. 

Many major economies are seeing surges of coronavirus cases during the winter period. This has spooked markets amid fears of more lockdowns and a longer period of economic losses. 

Investors were also concerned about weak US retail sales and jobless claims published last week. 

These combined factors kept markets in an overall risk-off mood ahead of the inauguration of US President-elect Joe Biden on Wednesday. As a result, the safe haven US Dollar remains appealing. 

Pound to US Dollar (GBP/USD) Exchange Rate Could Recover Again 

The Pound to US Dollar exchange rate is unappealing as investors avoid risk-taking in favour of the safe US Dollar. However, some analysts believe that the Pound could see stronger performance soon. 

Britain’s coronavirus situation has shown signs of improving. According to Yohay Elam, Analyst at FXStreet, Sterling movement could depend on the expansion of Britain’s coronavirus vaccination programs in the coming sessions: 

‘Headlines about new vaccination centers would be supportive, while delays in production or distribution of the jabs would weigh on the Pound.’ 

With economic calendars quiet until later in the week and the US economy closed today, the US Dollar’s movement will likely be more focused on market sentiment and shifts in safe haven demand. 

If markets continue to become more optimistic about vaccine rollout again, sentiment could improve. On the other hand, the safe haven US Dollar could climb a little higher if the pandemic situation keeps worsening in major economies. 

Pound to US Dollar (GBP/USD) exchange rate investors will also be closely watching Joe Biden’s first actions as he takes office as US President on Wednesday.