The Pound to US Dollar exchange rate was rangebound today as disappointing payroll data from the US at the end of last week keeps USD from gaining.
At the time of writing the pair is trading at around $1.3721.
Pound (GBP) Supported By Coronavirus Vaccine Rollout
The Pound continues to be supported by the success of the UK vaccine rollout with over 12 million people now receiving their first dose, and the country on course to vaccinate 15 million of the most clinically vulnerable by the 15th of February.
However hopes restrictions are to be eased from the 15th of February are all but non-existent as schools remain closed until at least the beginning of March.
Cases in the UK have now dropped to pre-Christmas levels signifying that the current national lockdown is working.
However, fears grow over the South African variant of the virus with reports stating that the AstraZeneca vaccine is not effective against.
Speaking today however Prime Minister Boris Johnson downplayed those reports saying:
‘We’re very confident in all the vaccines that we’re using. I think it’s important for people to bear in mind that all of them, we think, are effective in delivering a high degree of protection against serious illness and death, which is the most important thing.’
“We will be continuing to study the results, the effectiveness of the vaccine rollout, and that’s going very, very fast indeed.’
US Dollar (USD) Muted on Back of Weak Jobs Report
The US Dollar was muted as negative non-farm payroll data released last week from January did little to support the currency.
The US Dollar has also found itself struggling as the proposed $1.9trn stimulus package from the Biden administration has caused concern that it will push inflation up.
Former Treasury Secretary Summers had a stark warning about the size of the proposed stimulus saying that if passed it could cause ‘inflationary pressure of a kind we have not seen in a generation with consequences for the value of the dollar and financial stability.’
Analysts from ING said:
‘Inflation is becoming a prominent theme for financial markets with a growing suspicion that its rise could be larger and longer-lasting than the Federal Reserve is currently anticipating.’
Pound to US Dollar Outlook: UK GDP to Support Sterling?
In lieu of any important UK data releases for the most part of the week, GBP movement will be dictated by any further coronavirus developments, with Health Secretary Matt Hancock leading a press conference at 5pm this evening.
Pound investors will look to Friday’s UK GDP report from Q4, which is expected to show a positive final three months of 2020, though if the growth rate does prove negative Sterling could suffer.
US Dollar investors will be looking towards inflation data from January and speeches from the Federal Reserve this week.