GBP/USD Exchange Rate Heads Higher as Risk-On Market Mood Limits ‘Greenback’
The Pound US Dollar (GBP/USD) exchange rate rose by 0.2% today ahead of a speech from US Federal Reserve Chairman Jerome Powell. The pairing is currently trading around $1.37.
USD investors are expected Fed Chair Jerome Powell to reiterate the bank’s generally dovish outlook for the US economy.
As a result, we could see the USD/GBP exchange rate begin to suffer as investors become more concerned about the outlook for the world’s largest economy.
Jerome Powell has, however, expressed some optimism about growth in the US economy, but highlighted the risks of Covid-19. Powell said:
‘We feel like we’re at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly.
‘The outlook has brightened substantially. And that’s the base case. I would say again though, there really are risks out there. The principal risk to our economy right now really is that the disease would spread again. It’s going to be smart if people could continue to socially distance and wear masks.’
The US Dollar (USD) has also been limited by risk-on mood as markets become more confident about the global Covid-19 situation.
Pound (GBP) Exchange Rate Rises as UK Productivity Increases
The Pound (GBP) rose today after the Office for National Statistics (ONS) revealed that the UK’s productivity had risen by 0.4% last year.
However, the overall production fell by 10% because of the Covid-19 pandemic.
The ONS commented:
‘Although there was substantial volatility during the year, this contrasts with a slow and steady decline in productivity during the 2008-09 economic downturn.’
Nevertheless, yesterday’s release of the latest GDP reading for February showed a marked improvement in the nation’s economy despite coronavirus restrictions.
Suren Thiru, the head of economics at the British Chambers of Commerce, expressed some caution, however, saying:
‘[H]ope of a sustained consumer-led revival may prove too optimistic as the economic scarring caused by Covid may trigger a renewed reluctance to spend as government support winds down.’
UK markets are more confident about the outlook for the nation’s economy, however, now that some lockdown restrictions have been eased and Covid-19 infection rates remain relatively low.
GBP/USD Exchange Rate Forecast: US Initial Jobless Data in Focus
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the latest US Initial Jobless Claims report.
Any indications of rising unemployment in America could further drag down the USD/GBP exchange rate.
Tomorrow will also see the release of the US Philadelphia Fed Manufacturing Survey for April.
If this shows any signs of improvement, however, then the ‘Greenback’ could begin to edge higher against its peers.
The Pound US Dollar (GBP/USD) exchange rate will continue to be driven by Covid-19 news this week.
But with the UK’s situation looking relatively stable, then we could see British market optimism boost Sterling.