Pound US Dollar Exchange Rate Firms in Thin Trade
The Pound US Dollar (GBP/USD) exchange rate is trending higher today, as subdued trading conditions favour Sterling.
At the time of writing the GBP/USD exchange rate is trading at around $1.3327, up roughly 0.4% from today’s opening rate.
US Dollar (USD) Undermined by Thin Trading Conditions
A clear US Dollar (USD) selling bias has prevailed so far this week, as the appeal of the currency has been undermined by increasingly thin trade ahead of the festive season as well as a broadly risk-on mood.
The former has seen a number of USD investors engage in some profit taking in year-end trade, after what has been a broadly strong year for the ‘Greenback’
These movements have been exacerbated by the current liquidity conditions as many market participants have already left for the holiday’s, leading those still left to have a disproportionate impact.
Elsewhere the appeal of the US Dollar has also been dented by the risk-on mood which has emerged this week, in spite of growing concerns over Omicron variant of Covid and its impact on the global economic recovery as more countries are forced to reimpose restrictions to combat the highly infectious strain.
These factors have also seen USD exchange rates weaken during today’s session despite the latest US GDP figures revising domestic growth higher than previous estimated in the third quarter.
Threat of Post-Christmas Lockdown to Limit Upside in the Pound (GBP)
At the same time, whilst it is trending higher against the US Dollar and the majority of its other peers today, the Pound (GBP) could struggle to sustain these gains, despite thin trading conditions.
This is in large part due to ongoing uncertainty over what Covid restrictions could be introduced in England after Christmas.
While Boris Johnson has confirmed that no new measures will be imposed before the big day, it is widely assumed that the government will need to tighten restrictions in the days that follow.
Sources suggest the government is hotly debating whether to go ahead with a two-week ‘circuit breaker’ lockdown just after Christmas, or opt for more ‘light touch’ restrictions.
In either case the response by GBP investors is likely to be negative as these will no doubt further undermine economic activity.
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