GBP/USD Exchange Rate Rises as Hopes for UK Economy Continue to Grow
The Pound to US Dollar exchange rate rose today after it hit a 33-month high at $1.39 on hopes that the UK economy will rebound when lockdown restrictions are lifted. The pairing is currently fluctuating around $1.39.
Ricardo Evangelista, senior analyst at ActivTrades, explains:
‘The British pound continues to edge higher versus other major currencies during early Tuesday trading. Sterling’s performance is defying the forecasts of most analysts, who saw the post-Brexit constraints and the economic impact of the pandemic in Britain as strong headwinds for the currency.’
After the UK hit its 15-million target in nationwide Covid-19 vaccinations, GBP investors have become more optimistic about the British economy in the months ahead.
Prime Minister Boris Johnson also announced a ‘cautious but irreversible’ plan to ease lockdown restrictions in the coming months.
Johnson also said:
‘The dates that we will be setting out will be the dates by which we hope we can do something at the earliest … If, because of the rate of infection, we have to push something off a little bit to the right – delay it for a little bit – we won’t hesitate to do that.’
As a result, UK market confidence is buoying the GBP/USD exchange rate as the outlook for the nation’s economy continues to improve.
US Dollar Dips as Demand for Safe-Haven Currencies Compromised by Vaccine Optimism
The US Dollar continues to struggle against Sterling today as demand for the safe-haven currency has slipped on growing confidence in the global economy.
Now that more and more countries are rolling out the Covid-19 vaccine, investors are more hopeful that the global economy could begin to stabilise in the coming months.
Furthermore, with the US expected to push forward with its $1.9-trillion stimulus package, markets are becoming more confident about the state of the world’s largest economy.
Connor Campbell, a financial analyst at SpreadEx, commented:
‘After Monday’s President’s Day holiday, the Dow Jones is back in the saddle this Tuesday – and it’s going record-chasing. Now that Donald Trump’s second impeachment is dealt with, Congress can firmly focus on the stimulus package, which is potentially on track to be in place by mid-March.’
US Dollar investors are also awaiting today’s speech from Michelle W. Bowman, the governor on the Federal Reserve’s board.
Any upbeat comments about the future of the world’s largest economy in the coming months could further weigh on demand for the safe-haven ‘Greenback’.
Could a Dovish FOMC Strengthen Demand for Safe-Haven Assets?
US Dollar traders will be awaiting tomorrow’s release of the latest Retail Sales data for January.
Any improvement in the US economy could further limit demand for the safe-haven USD.
‘Greenback’ investors will also be monitoring tomorrow’s minutes from The Federal Open Market Committee (FOMC).
If the FOMC indicate any further obstacles to America’s economic growth, however, we could see the US Dollar benefit from returning demand for safe-haven assets.
The GBP/USD exchange rate will likely continue to rise, however, as Sterling continues to benefit from growing optimism for Britain’s economy.
Also, if UK Covid-19 rates continue to drop and vaccinations increase, the Pound will continue to head higher against its peers.