The Pound US Dollar (GBP/USD) exchange rate has traded in a narrow range today after comments from the Bank of England (BoE) Governor Andrew Bailey offered fresh support to Sterling.
At the time of writing the pair are currently trading at around $1.3841. Bailey’s comments have offset the US Dollar’s strength, which has been underpinned by rising US Treasury yields
Pound (GBP) Supported by ‘Growing Sense’ of Economic Optimism in the UK
The Pound found renewed support from comments made by the BoE Governor Andrew Bailey this morning.
Speaking at a Resolution Foundation event, Mr Bailey said:
‘There is a growing sense of economic optimism, in markets and in consumer and business confidence measures. The rate of new Covid infections is declining, and the vaccine programme is a huge achievement. There is light at the end of the tunnel.’
Bailey did however speak of ‘cautionary realism,’ going on to say that:
‘A note of realism though: our latest forecast in essence painted a picture of an economy that starts at a lower level of activity as a result of the current restrictions and people’s natural caution associated with the renewed onset of Covid, which then gets back to where it was pre-Covid by the early part of next year.’
Sterling was also supported by an increase in Business Confidence in the Service Optimism Index from BDO LLP, which is back at pre-pandemic levels
US Dollar (USD) Continues Rally on Rising Yields
The US Dollar continues to rally on rising yields as attention also turns to President Joe Biden’s proposed $1.9trn stimulus, which is expected to be signed by the President on or before the 14th of March.
The US Senate approved the package over the weekend, though the plans continue to draw criticism from Republican lawmakers.
Kate Bedingfield, the White House communications director, said:
‘This is a bill that reflects President Biden’s belief that the best way to get the economy back on track and get it growing is to invest in working people and middle class people. It is urgent aid that is going to help people all across the country but it’s also making a long-term investment.’
Pound US Dollar Outlook: US Business Optimism in Focus
US Dollar investors will be awaiting this afternoons Wholesale Inventories from the US which is forecast to have increased to 1.3%.
More importantly, tomorrow will see the release of the NFIB Business Optimism Index from February, which if meets forecasts would show a modest increase to 96 following January’s 9-month low.
US Treasury yields will likely be the key driver through until Wednesday when US inflation for February is released. It’s forecast to rise which could send Treasury yields higher again, supporting the US Dollar further.
An absence of notable data from the UK will leave Pound traders to focus on any further coronavirus developments, as it is reported just 1 in 220 people are now infected heading into the week, compared to 1 in 145 the previous week.
As schools return and care home begin to allow visitors, Pound investors will be keeping an eye to see whether the first stage of the UK’s roadmap out of lockdown is a success.