Pound US Dollar Exchange Rate Jittery despite Stronger than Expected UK Data
Mixed risk-sentiment and Britain’s uncertain coronavirus outlook are leaving the Pound US Dollar (GBP/USD) exchange rate volatile this week so far. Today’s stronger than expected UK job market report was not enough to boost the Pound’s appeal.
GBP/USD opened this week at the level of 1.3682, and movement has been volatile since. GBP/USD attempted to advance yesterday and briefly tumbled this morning, but at the time of writing the pair is trending near the week’s opening levels again.
It follows last week’s much more broad movement. GBP/USD soared from the opening level of 1.3583 last week and briefly touched on a two-and-a-half-year best of 1.3742 before slipping at the end of the week.
Pound (GBP) Exchange Rates Lack Drive as UK Outlook Still Gloomy
Investors are hesitant to make big moves on the Pound (GBP) this week, due to concerns that Britain’s coronavirus situation could take months to improve.
The UK Covid19 infection rate is still high and is seeing only small signs of improving. It has led to concerns of months more lockdown and restrictions.
As a result of this broad uncertainty, today’s UK job market report was not enough to boost the Pound’s appeal. This is despite the job stats largely beating expectations.
Analysts have expressed concern that resilience in the job market could fail once again if there is not sufficient support for job retention beyond the end of the government’s support programs.
US Dollar (USD) Exchange Rates Slip as Safe Haven Demand Softens
At the beginning of the week, investors looked for safe currencies due to concerns about worsening coronavirus infection rates around the globe. This caused some Monday strength in the US Dollar (USD).
However, today the US Dollar’s movement is more mixed. This safe haven demand has been softening a little, and uncertainty over the direction of the pandemic is causing mixed risk-sentiment as well.
Concerns that the expected US fiscal stimulus package could be delayed has also been limiting the US Dollar’s movement.
Overall, a mixed global coronavirus outlook is limiting the strength and direction of US Dollar movement.
Pound US Dollar (GBP/USD) Exchange Rates Await Federal Reserve
Most of this week’s key UK data has been published already, but there is still key news on the way for US Dollar investors in the coming sessions.
Tomorrow will see the publication of key US data, such as durable goods orders, but the biggest focus of the day will be the Federal Reserve policy decision.
It will be the first Fed decision of the Joe Biden Presidency. Any shift in tone from the bank will be closely watched by investors.
If the bank indicates that it is unlikely to become more hawkish any time soon, the US Dollar’s appeal is likely to remain limited.
On top of Federal Reserve news, coronavirus developments will of course be influential as well.
A worsening global coronavirus situation will boost safe haven demand and the US Dollar. On the other hand, improving coronavirus situations could cause better market sentiment and a weaker US Dollar.
If the UK situation is one of those situations that improves, the Pound US Dollar (GBP/USD) exchange rate could benefit from risk-on movement and climb higher again.