GBP/USD Exchange Rate as Confidence Grows in UK Economy
The Pound to US Dollar exchange rate rose today, with the pairing currently trading around $1.40.
Sterling has benefited from Prime Minister Boris Johnson’s confidence that the summer of 2021 will be ‘incomparably better’ because of the UK’s rapid rollout of Covid-19 vaccines and falling infection rates.
The Prime Minister said:
‘The end really is in sight, and a wretched year will give way to a spring and a summer that will be very different and incomparably better than the picture we see around us today.’
As a result, GBP investors are now more confident that the UK’s economy could begin to recover in the months ahead.
Today saw the release of the UK IFO Unemployment Rate report, which confirmed forecasts and rose to a near five-year-high at 5.1%.
James Smith, an analyst at ING, was markedly confident about the data, saying:
‘The latest UK jobs data provides further evidence that the jobs market stabilised in the final weeks of 2020, following a turbulent autumn… But the furlough scheme was subsequently fully extended, and this latest data shows that this helped the unemployment rate to settle slightly above 5% – around a percentage point above its pre-virus level.’
Now that the UK has outlined its lockdown exit plan, however, the outlook for both the economy and employment will likely improve in the months ahead.
US Dollar (USD) Dips on Ebbing Safe-Haven Demand
The US Dollar has continued to remain weak as demand for the safe-haven currency continues to be subdued on growing confidence in the global economy.
Added to this extra pressure has been put on the ‘Greenback’ owing to a pullback in US Treasury yields throughout Europe’s trading session.
Vicky McKeever, an analyst for CNBC, commented:
‘Yields eased back in morning trading following comments from European Central Bank President Christine Lagarde that her team was monitoring rising rates. Rates rose again later in the session.
‘Bleakley Advisory Group’s Peter Boockvar said Lagarde “will be less inclined to accept a rise in long-term rates” relative to some other central bankers. Fed chair Jerome Powell is set to address Congress on Tuesday and Wednesday.’
USD investors will be awaiting today’s testimony from the US Federal Reserve’s Chairman Jerome Powell.
Any dovishness from Powell, however, could bolster demand for the US Dollar as the outlook for the world’s largest economy begins to falter.
GBP/USD Forecast: Could an Upbeat Bank of England Boost the Pound Tomorrow?
US Dollar investors will be awaiting tomorrow’s testimony from Federal Reserve Chairman Jerome Powell.
Any dovishness about the US economy, however, could spark demand for the safe-haven currency.
Tomorrow will also see the publication of the US New Home Sales data for January. If this posts an improvement on last year, then the ‘Greenback’ could benefit.
However, the US Dollar will continue to be driven by global risk sentiment. If Covid-19 rates continue to drop worldwide and vaccinations are ramped-up, then demand for the safe-haven ‘Greenback’ will continue to fall.
Pound investors will be looking ahead to tomorrow’s Monetary Policy Report Hearings from the Bank of England.
The GBP/USD exchange rate will head higher if the BoE is notably confident about the outlook for Britain’s economy.