Pound to US Dollar Exchange Rate Edges Higher despite Gloomy UK Outlook
The Pound Sterling to US Dollar (GBP/USD) exchange rate’s movement has been jittery since markets opened today. Both the Pound (GBP) and US Dollar (USD) have been weak lately, which has left the pair volatile.
Last week saw GBP/USD tumble from the level of 1.2622 and shed around half a cent, ending the week near the level of 1.2568. During the week, GBP/USD also touched on a monthly high of 1.2663 before ending lower.
Movement has been comparatively narrow since markets opened today. GBP/USD briefly dipped even lower. However at the time of writing, GBP/USD is trending higher in the region of 1.2584.
It comes as investors sell the US Dollar on persisting market demand for riskier assets. The Pound’s appeal is limited though, so investors may be hesitant to buy the Pound to US Dollar exchange rate too much.
Pound (GBP) Exchange Rates Struggling for Ground as Outlook Worsens
While the Pound is advancing against the US Dollar today, the British currency’s appeal is broadly limited.
Investors are hesitant to buy the Pound too much despite the US Dollar tumbling. This is because last week’s disappointing UK data only added to market concerns about Britain’s outlook.
Poor UK growth data added to concerns over Britain’s handling of the coronavirus and Brexit crises. According to Lee Hardman, Currency Analyst at MUFG:
‘Incoherent government policy on COVID, the 2nd worst COVID death rate by population in the world, high frequency data that indicates a more subdued recovery, a budget deficit profile that is worse than most other major economies and rising Brexit uncertainties all point to the Pound being singled out as higher risk than most other G10 currencies,’
US Dollar (USD) Exchange Rates Kept Under Pressure by Coronavirus Recovery Hopes
The US Dollar is a currency typically correlated with market demand for safe havens. However, US coronavirus fears have limited the US Dollar’s ability to capitalise on safe haven demand, which is already fairly limited.
Fears of a ‘second wave’ of coronavirus infections are boosting safe haven demand slightly. However other coronavirus developments are keeping risk-sentiment buoyant instead.
Expectations for more coronavirus stimulus in the US and Eurozone, as well as optimism over coronavirus vaccine developments, are keeping riskier assets appealing.
Amid signs that EU leaders are making progress on an EU Recovery Fund, safe haven currencies like the US Dollar were even less appealing.
Pound to US Dollar (GBP/USD) Exchange Rate May Struggle to Sustain Gains
The Pound to US Dollar exchange rate outlook has been increasingly dominated by uncertainties over the past few weeks. This is unlikely to change any time soon, which could leave the pair jittery and volatile in the coming sessions.
Though Sterling is attempting to climb today, its potential for gains is limited. Concerns over Britain’s coronavirus and Brexit outlooks, as well as Britain’s concerning ecostats, will continue to weigh heavily.
Some notable UK ecostats due for publication throughout this week are unlikely to have much impact on the Pound, but surprising data could still influence the outlook.
At the end of the week especially, Britain’s latest retail sales and PMI projection data could influence the Pound outlook.
As for the US Dollar, market shifts in risk sentiment as well as US coronavirus developments could also cause Pound to US Dollar (GBP/USD) exchange rate movement.