The Pound to US Dollar (GBP/USD) exchange rate has recovered this week and has hit near highs of 1.37the best levels for the pair since mid-2018.
The pair is currently trading around $1.3682.
Pound (GBP) Exchange Rate Buoyed on back of Bank of England Comments
After the third national UK lockdown was announced last week, there had been speculation that the Bank of England (BoE) could introduce negative interest rates to help to support the economy, which proved negative for the Pound (GBP).
However, following on from Tuesday’s comments from BoE Governor Andrew Bailey, which ended the speculation, Sterling has since rallied and continues to find support from markets.
Furthermore, the Pound rose as Home Secretary Priti Patel addressed the nation and said that the current lockdown restrictions were ‘tough enough,’ calming investors who had been worried that tougher restrictions could have been announced to tackle rising infection rates.
However, Scotland’s further tightening of restrictions could spell trouble for investors.
Scottish First Minister, Nicola Sturgeon announced the restrictions saying:
‘Don’t think in terms of the maximum interactions you can have without breaking the rules. Think instead about how you minimise your interactions to the bare essentials to remove as many opportunities as possible for the virus to spread.’
‘In everything you do, assume that the virus is there with you – that either you have it or any person you are in contact with has it – and act in a way that prevents it passing between you.’
US Dollar (USD) Exchange Rates Lacklustre against Increased Risk-Appetite
The US Dollar (USD) has been unable to find any notable gains this week, as the safe-haven currency suffers from increased global risk-appetite as coronavirus cases surge in the country and US fiscal stimulus speculation continues.
The US Dollar was also pressured by a bullish sentiment surrounding financial markets, with an expected economic recovery for 2021 pushing the ‘Greenback’ down further.
Furthermore, U.S. Treasury yields have fallen from recent highs though a modest increase has been reported, supporting the dollar. US inflation rate has also helped to stabilise the US Dollar today.
Pound to US Dollar (GBP/USD) Exchange Rate Could be Weakened by UK Growth Data
For Pound (GBP) investors any coronavirus developments will remain in focus for the end of the week, with a success in the rollout of vaccines seen as GBP-positive.
Sterling investors will also be watching Friday’s UK growth data which could weaken the GBP/USD exchange rate.
US Dollar (USD) investors will be looking to Federal Reserve officials over the coming days, with Fed chair Jerome Poweel speaking, and any indication that US monetary policy will be kept loose the US Dollar is likely to struggle further.
US Dollar investors will also be focusing on Friday’s initial jobless claims, which could disappoint USD traders.