GBP/USD Exchange Rate Edges Higher In Spite of UK Covid-19 Variant Fears
The Pound to US Dollar exchange rate rose today, with the pairing currently trading around $1.39.
Sterling rose against the ‘Greenback’ today despite the search for a UK Brazilian Covid-19 variant.
As a result, this is causing concern to UK markets as the new variant is known to be more transmissible and more resistant to antibodies.
UK Health Secretary Matt Hancock eased fears, however, saying that the search had now been narrowed down to several hundred houses in the south-east.
In UK economic data, today saw the release of February’s Nationwide Housing Prices figure, which rose by 6.9%.
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, commented on the data:
‘Record high agreed sale prices are a sign that the market is still being buffeted by the unshakeable desire of many to move to larger, more spacious and more expensive homes.
‘Demand is still exceptionally strong and that has been reinforced already this week by Bank of England data that showed approvals for house purchase in January were still far outstripping the pre-pandemic average. This is a key indicator for future mortgage lending and transaction levels.’
As a result, GBP investors are becoming more optimistic about the outlook for the UK economy now that Covid-19 rates are dropping and vaccination numbers are rising.
US Dollar (USD) Heads Higher on Covid-19 Stimulus Optimism
The US Dollar rose against many of its peers today following positive news about US President Joe Biden’s stimulus package.
Now that it has passed successfully through the House of Representatives USD investors are more hopeful that it will also clear the Senate this week.
Yesterday also saw the release of the latest ISM Manufacturing PMI for February, which beat forecasts and rose to 60.8 – a three-year high.
PNC Chief Economist Gus Faucher commented:
‘Strong consumer demand for goods, increasing business investment, a roaring housing market and global economic growth are all supporting U.S. manufacturing.’
However, improving risk-sentiment has limited the appeal of the safe-haven ‘Greenback’ today, with investors instead seeking out riskier assets.
GBP/USD Forecast: UK 2021 Budget in Focus
US Dollar traders will be awaiting tomorrow’s release of February’s UK ISM Services PMI. Any improvement in the outlook for the US economy could further buoy demand for the ‘Greenback’.
Tomorrow will also see the publication of February’s US ADP Employment Change data, which is expected to rise to 177 thousand.
However, risk sentiment will continue to drive the USD/GBP exchange rate this week. If the global Covid-19 situation shows signs of improving, then demand for the safe-haven ‘Greenback’ would fall.
The GBP/USD exchange rate will continue to be driven by the UK’s Covid-19 situation, however. If coronavirus cases continue to fall, then Sterling would head higher.
Tomorrow’s 2021 Budget announcement from Chancellor Rishi Sunak, however, will remain in focus.
Could the Pound head higher once Mr Sunak reveals further fiscal stimulus to the UK economy?