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Pound US Dollar Exchange Rate Flounders as Both Currencies Run Out of Steam

Pound US Dollar

Pound US Dollar Exchange Rate Struggling after Giving Up Last Week’s Gains 

As both currencies see mixed performance in recent weeks, the Pound US Dollar (GBP/USD) exchange rate continues to see highly volatile movement. Investors continue to pull away from the Pound (GBP), but the US Dollar (USD) is struggling to capitalise on that. 

Last week saw GBP/USD climb from 1.3790 to 1.3830, but this week has already seen the pair give up those gains and more. 

After a brief advance attempt at the beginning of the week, GBP/USD movement has been more dovish. At the time of writing, GBP/USD is trending in the region of 1.3750. This isn’t far above the lows of 1.36 seen last month. 

Some notable US data is due before the end of the week. However, in the absence of surprises investors will look ahead to next week’s UK growth data and global coronavirus news. 

Pound (GBP) Exchange Rates Fail to Find Support in Data, but Outlook Still Strong 

Today saw the publication of Britain’s latest construction PMI data. The data beat forecasts, showing that Britain’s construction sector was seeing a healthy period of rebound. 

According to Tim Moore, Economics Director at IHS Markit: 

‘Total activity expanded to the greatest extent for six-and-a-half years as residential spending remained robust, commercial projects restarted and infrastructure contract awards moved ahead.’ 

The data did little to influence movement in Sterling, which has been falling this week as investors sell it from highs in profit taking. 

Still, the outlook for the Pound remains strong overall. Optimism over Britain’s coronavirus pandemic recovery outlook persists and is keeping Sterling from falling too much. 

US Dollar (USD) Exchange Rates Slips as Federal Reserve Remains Dovish 

The Federal Reserve published its March meeting minutes report overnight. As expected, the bank remained dovish. 

Despite speculation that the Fed could show signs of hawkishness in response to rising US inflation, the bank looked to soften concerns about inflation and insisted that monetary policy would remain ultra loose. 

This dampened some of the recent bullishness around the US Dollar, and led to weaker safe haven and US Dollar demand today. 

According to Charalambos Pissouros, Senior Market Analyst at JFD Group: 

‘This is in line with what we’ve been expecting and adds more credence to our view that the Fed is unlikely to start policy normalization any time soon,’ 

Pound US Dollar (GBP/USD) Exchange Rate May Recover Soon 

Investors have been hesitant to buy the Pound this week, but the British currency’s underlying appeal could help it recover against the US Dollar soon. 

This is because the US Dollar’s appeal is also limited. Without more strong US data or Fed speculation, the US Dollar may be hesitant to keep rallying. 

US Dollar investors are anticipating tonight’s speech from Federal Reserve Chairman Jerome Powell. According to Yohay Elam, Analyst at FXStreet, the US Dollar may be in for even further losses if Powell avoids any signs of hawkishness: 

‘if he reiterates that the bank is here to help out – or ‘not even thinking of raising rates’ – the greenback could fall, allowing cable to recover.’ 

Friday’s US wholesale sales results could also influence the US Dollar if it surprises investors. 

As for the Pound, while fresh bullishness may be limited for now, Sterling will remain appealing if the UK continues to recover from its coronavirus pandemic lockdown. 

Pound US Dollar (GBP/USD) exchange rate investors are also awaiting next week’s UK growth rate report. 

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