GBP/USD Exchange Rate Rangebound as UK Markets Await Retail Data for May
The Pound to US Dollar (GBP/USD) exchange rate fluctuated around $1.26 today, with the pairing rangebound as Sterling benefits from hopes that Downing Street will further ease Covid-19 lockdown measures this week.
Prime Minister Boris Johnson is expected to announce an easing of restrictions on pubs, restaurants, and other leisure sectors which have access to outdoor areas such as beer gardens.
As a result, Pound (GBP) investors are hopeful that the UK could begin to take steady steps towards recovering its economy.
Tim Martin, the chairman of JD Wetherspoon, commented:
‘Few pubs will be able to make a profit using outdoor space only but partial reopening will provide a psychological boost to a beleaguered industry.’
‘It will signal the intent of the government to make progress towards normality, which will be welcome.’
Meanwhile, GBP investors will be looking ahead to today’s release of the UK’s BRC retail sales report for May. However, any further indications of deterioration in the UK’s retail sector would prove Pound-negative.
US Dollar (USD) Steady on Positive US Employment Data
The US Dollar (USD) has continued to suffer from a risk-on sell-off this week, with investors seeking out riskier assets as the global economy shows signs of improvement from the coronavirus pandemic.
Meanwhile, New York is expected to ease Covid-19 lockdown measures from today, leaving many ‘Greenback’ traders feeling more optimistic about the world’s largest economy’s recovery in the month’s ahead.
After last week’s surprisingly strong US employment numbers, traders have flocked to riskier currencies as the global economic situation continues to reflect America’s slow recovery.
Tony Bedikian, head of global markets at Citizens Bank, commented:
‘Barring a second surge of Covid-19, the overall U.S. economy may have turned a corner, as evidenced by the surprise job gains today, even though it still remains to be seen exactly what the new normal will look like.’
Meanwhile, oil futures have continued to rise today on prospects of increased output. Consequently, investors are flocking to risky assets as oil-prices continue to surge in the wake of the peak of the coronavirus crisis.
GBP/USD Forecast: Could Risk-On Markets Drag Down the US Dollar This Week?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the US NFIB Business Optimism Index for May. However, any further improvement in American business morale would further support risk-on market mood and weaken the safe-haven ‘Greenback’.
As a result, we could see the US Dollar (USD) continue to weaken throughout the week as investors continue to rely on riskier assets as the global economic situation improves.
The GBP/USD exchange rate could edge higher this week if Downing Street continues to ease Covid-19 lockdown measures. As a result, we could see Sterling gain favour as the Britain’s economic outlook brightens.