Pound to US Dollar Exchange Rate Gains Limited amid USD Support
The Pound (GBP) experienced a surge in demand last week, but the Pound to US Dollar (GBP/USD) exchange rate was only able to recover around half of the previous week’s losses. The US Dollar (USD) outlook remains strong amid global risk-sentiment and strong US data.
In the first week of February, GBP/USD slumped from 1.3204 to 1.2892. Last week GBP/USD recovered, but only to the level of 1.3048.
Since then GBP/USD has seen fairly limited movement and remains near that level at the time of writing on Monday.
Investors are hesitant to keep buying Sterling following last week’s surge, and the US Dollar remains resilient amid expectations for continuing safe haven demand. Upcoming UK and US data could be highly influential for the Pound to US Dollar exchange rate outlook.
Pound (GBP) Exchange Rate Outlook Awaiting Key UK Data
Investors piled into the Pound last week, as investors reacted to the week’s UK political developments.
UK Prime Minister Boris Johnson pressured Sajid Javid to quit as Finance Minister. Javid was quickly replaced with loyalist Rishi Sunak, who markets hope could expand government spending at the next budget.
Hopes for more government spending left Bank of England (BoE) interest rate cut bets even lower, and the Pound much higher.
Sterling’s movement has steadied since Friday though, as investors await more signs of UK economic strength before buying the currency higher. For now, investors are anticipating key data due for publication throughout this week.
US Dollar (USD) Exchange Rate Outlook Solid as Safe Haven Demand and Data Offer Support
The US Dollar has remained resilient enough to avoid bigger losses against a resurgent Pound.
Concerns about the spread of the coronavirus, now expected to become a more long-term problem, has kept investors eager to hold on to safe haven-correlated assets.
As the US Dollar is a safe currency it is benefitting from the expectation for a long period of uncertainty over the virus.
On top of this, US data has been fairly solid. This has helped to keep Federal Reserve interest rate cut speculation light and the US Dollar strong. Friday’s US production stats disappointed, but trade stats beat forecasts.
The US Dollar’s resilience limited the Pound’s strong advances last week. This week so far, GBP/USD has slipped slightly from the week’s opening levels.
Pound to US Dollar (GBP/USD) Exchange Rate Outlook to be driven by Data
Brexit and coronavirus uncertainties still linger over markets. These long-term factors will continue to keep pressure on the Pound and US Dollar over the coming months.
However, long term factors often slip into the background if there are no significant developments. This means that for the time being, the Pound to US Dollar exchange rate is more likely to be driven by key data.
Multiple major UK and US ecostats will be published in the coming days, starting with UK job market stats tomorrow, UK inflation and Federal Reserve minutes on Wednesday, and PMI projections on Friday.
If UK data continues to indicate that Britain’s economy is seeing a rebound in 2020, the Pound could see further strong performance.
However, if data is disappointing or safe haven demand and US data keep the US Dollar strong, the Pound to US Dollar (GBP/USD) exchange rate outlook could fall instead.