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GBP/USD Exchange Rate: Will UK Covid Optimism Wane?

US Dollar Currency Forecast

GBP/USD Exchange Rate Softens amid Mixed UK Data

The Pound US Dollar (GBP/USD) exchange rate has weakened so far today, after mixed data from the UK failed to impress GBP investors.

Pound (GBP) to Weaken on Fading Covid Confidence?

The Pound (GBP) has struggled to make gains today, despite UK GDP growing by 4.8% in the second quarter of this year.

The mixed sentiment comes as business investment, industrial production and the UK’s balance of trade all missed market forecasts. Meanwhile, despite rapid growth from April to June, UK GDP is still 4.4% below pre-pandemic levels, which means the UK economy is lagging behind other G7 nations.

Sterling could struggle as markets continue to digest the mixed data, while a lack of data for the rest of the week could leave GBP vulnerable to further losses.

Meanwhile, could the UK’s Covid confidence be waning?

While hospitalisations continue to decrease as the vaccine proves effective at preventing serious illness, other markers of pandemic progress have slowed or stalled.

Confirmed cases have been rising, with the weekly Covid count up by 12,039 (6.5%) this week. Daily deaths have also seen modest rises in recent days.

In addition, the UK’s vaccination programme has started to slow down. After an impressive initial rollout, the UK has now been overtaken by six EU countries in terms of double vaccinations.

As such, we may see GBP/USD undermined by fading Covid optimism if cases continue to rise.

Will Initial Jobless Claims Boost the US Dollar (USD)?

Meanwhile, the US Dollar (USD) has been firming today ahead of the latest initial jobless claims.

USD took a hit yesterday after the US CPI held steady, with some analysts suggesting that inflation may have now peaked. The result disappointed USD bulls who were hoping for another inflation overshoot, as it would have piled pressure on the Federal Reserve to begin tightening monetary policy – particularly after last week’s impressive non-farm payrolls.

Instead, it seems as though the Fed will continue as planned, which dented the US Dollar yesterday and saw GBP/USD jump by 0.6%.

Today, investors are eyeing the most recent initial jobless claims figures. New unemployment benefits claims are expected to have dropped again last week to 375,000. If they print as predicted it will show the third successive decline and the lowest number of new weekly claimants since the end of June. Such a result would likely boost the US Dollar.

Tomorrow, the University of Michigan’s consumer sentiment is expected to hold at its lowest level since February. If the figure prints above or below forecast it could support or dent the US Dollar, respectively.