GBP/USD Exchange Rate Falls as Indian Covid-19 Varian Fears Dampen Demand for Sterling
The Pound US Dollar (GBP/USD) exchange rate fell by -0.2% today after Prime Minister Boris Johnson said he would rule ‘nothing out’ to fight the spread of the Indian variant of Covid-19. The pairing is currently trading around $1.40.
Boris Johnson also said that he was ‘anxious’ about the fast spread of the new variant across the UK.
Sterling has suffered from growing fears that the rapid spread of the Indian variant of the coronavirus could jeopardize the UK’s easing of lockdown measures.
Foreign Office minister James Cleverly said that the Government’s decisions would be ‘driven by the data’, adding:
‘The prime minister, the health secretary, have always been clear that the easing of restrictions which allow us to get back to normality will be done at a pace and in a way which is safe.’
As a result, UK markets are becoming increasingly jittery, with concerns that the new Indian variant could delay some of the easing of Covid-19 restrictions in the coming months.
US Dollar (USD) Edges Higher on Strong US Inflation Data
The US Dollar (USD) has continued to rise against the Pound today following yesterday’s publication of the US inflation figure for April. The data revealed that the consumer price index soared to 4.2% a – its highest level since 2008.
As a result, the ‘Greenback’ has benefited from growing confidence in the US economy, which is showing encouraging signs of recovering from the coronavirus pandemic.
James Knightly the Chief International Economist at ING, was optimistic about the data, saying that risk was now ‘definitely to the upside’.
Knightly also added:
‘Inflation is likely to head even higher over the next couple of months as price levels in a vibrant, strengthening economy that has supply constraints, contrast starkly with those of twelve months ago when the economy was in lockdown and prices were being slashed in order to generate cashflow. Just 0.2% MoM readings for May will leave headline CPI at 4.5% and core at 3.3% – the risks are most definitely to the upside.’
Today also saw the release of the US Initial Jobless Claims report for May. The figure beat forecasts, falling from 507,000 to 473,thousand.
Consequently, demand for the US Dollar has picked up as the outlook for the world’s largest economy continues to improve.
GBP/USD Exchange Rate Outlook: Could Strong US Retail Sales Boost the ‘Greenback’?
US Dollar (USD) traders will be looking forward to tomorrow’s release of the US retail sales data for April.
Any signs of retail sales rising last month would further boost the Pound US Dollar exchange rate.
Tomorrow will also see the release of the flash US Michigan Consumer Sentiment Index. If this confirms consensus and rise to 90.4, then the USD/GBP exchange rate could head higher.
The Pound US Dollar (GBP/USD) could claw back some of its losses before the weekend, however, as the UK is set to further ease lockdown restrictions on 17 May.