GBP/USD Exchange Rate Sinks as Joe Biden Presses Ahead with Stimulus Plan
The Pound to US Dollar fell by -0.5% today, with the pairing currently fluctuating around $1.35.
The US Dollar rose against Sterling today as US President Joe Biden continues to press ahead with the $1.9 billion US Covid-19 stimulus plan.
US Senate Majority Leader Chuck Schumer commented:
‘We cannot, cannot afford to dither, delay or dilute. We need a big, bold package along the lines of what President Biden has proposed, the American Relief Plan. We hope that our Republican colleagues will join us in offering amendments.’
As a result, demand for the US Dollar has risen as optimism continues to grow in America’s economic recovery.
However, investors are still seeking out the safe-haven ‘Greenback’ as concerns grow over the European Union’s slow rollout of Covid-19 vaccines.
Coming up in US economic news today, the latest Initial Jobless Claims could influence the USD/GBP exchange rate’s movement.
Any signs of rising US employment, however, could further drive-up demand for the safe-haven USD as the outlook for the world’s largest economy becomes more uncertain.
Pound Dips Ahead of BoE Interest Rate Decision
The Pound dipped today ahead of the Bank of England’s latest interest rate decision, which is expected to hold at around 0.1%.
However, with growing speculation that the central bank could begin discussing negative interest rates in the future, GBP investors are remaining cautious.
Economists at Goldman Sachs commented:
‘We … expect the MPC to indicate that it sees a moderately negative effective lower bound and that further rate cuts are feasible, even though a bank rate cut was not judged to be appropriate at this time.’
As a result, GBP investors are becoming more jittery about the outlook for the UK’s economy.
In UK economic news, today saw the release of January’s Construction PMI, which fell below forecasts into contraction territory at 49.2.
Tim Moore, Economics Director at IHS Markit, commented:
‘The latest survey highlighted that construction companies have become more cautious about the business outlook. Output rebounded quickly after stoppages on site at the start of the pandemic, but hesitancy among clients in January and worries about near-term economic conditions resulted in a dip in growth expectations for the first time in six months.’
GBP/USD Outlook: US NonFarm Payrolls in Focus
US Dollar traders will be awaiting tomorrow’s publication of January’s Nonfarm Payrolls data. Any signs of improvement in the US economy could drag down demand for the safe-haven USD.
Tomorrow will also see the publication of January’s US Unemployment Rate. If this continues to rise, however, we could see the ‘Greenback’ head higher as concerns for the global economy escalate.
GBP traders will be awaiting tomorrow’s speech from the Bank of England’s Governor, Andrew Bailey.
If Mr Bailey is notably dovish about the UK economy, then we could see Sterling suffer.
The GBP/USD exchange rate will mainly be driven by global risk sentiment this week. As a result, we could see the ‘Greenback’ benefit as concerns grow over the coronavirus pandemic.