GBP/USD Exchange Increases as Investors Flock to Riskier Assets
The Pound to US Dollar (GBP/USD) exchange rate edged higher today, with the pairing currently trading around $1.25.
The US Dollar (USD) suffered today as risk-appetite improved on early signs of a rebounding world economy.
Evidence that America is beginning to shake-off the devastating effects of the coronavirus crisis has given a boost to riskier assets today, leaving the ‘Greenback’ weaker than at the start of the week.
Furthermore, a surge of 18% in US retail sales in June has provided a boost to risk-sentiment. Improving retail sales and consumer confidence has offered a strong sign that the US economy is now on the road to recovery.
In US economic news, today will see the release of the Nonfarm Payrolls figure for June. If this confirms consensus and rises to 3,000, then we could see the US Dollar suffer as risk-sentiment improves.
Today will also see the release of the US unemployment rate report for June. However, if this continues to fall then we could also see the ‘Greenback’ sink as investors seek out riskier assets.
Steven Blitz, chief U.S. economist at TS Lombard, commented:
‘As the economy is reopening a lot of the jobs lost have come back and activity is coming back as well. The problem is the virus still has a big say in determining the trajectory of the recovery.’
Pound (GBP) Edges Higher as UK-EU Brexit Negotiations Enter Fourth Day in Brussels
The Pound (GBP) edged higher today as UK-EU negotiations begin their fourth day of talks in Brussels. As a result, Sterling traders are becoming more optimistic that the UK could secure a free trade deal with the European Union ahead of the December deadline.
However, German Chancellor Angela Merkel recently warned that the EU must begin preparations for a possible no deal.
She told the Bundestag:
‘The progress made during the negotiations have been, to put it mildly, minimal. With Great Britain, we have agreed to speed up these negotiations to be able to agree on a deal in autumn, which would then also need to be ratified until the end of the year.’
Meanwhile, several UK business leaders have expressed pessimism over the UK’s jobs market. On average, unemployment is expected to read 11% by the end of the year, up from 10% last month.
The Bank of England (BoE) also commented:
‘In the June [Decision Makers’ Panel] survey, businesses expected their sales in 2020 Q2 to be 38% lower than they would otherwise have been because of Covid-19, employment to be 8% lower and investment to be 38% lower.’
In UK economic news, today will see the release of the GfK Consumer Confidence report for June. Any signs of improvement could see the GBP/USD exchange rate edge higher.
GBP/USD Outlook: Could an Improving UK Services PMI Boost Sterling Tomorrow?
Pound (GBP) traders will be looking ahead to tomorrow’s release of the UK’s final Services PMI for June. Any improvement in the UK’s largest sector would prove GBP-positive.
The US Dollar (USD) will continue to be driven by global risk sentiment this week. If this continues to improve, then we could see the GBP/USD exchange rate continue to rise.
However, any further signs of US-China trade relations deteriorating could see investors flock back to safe-haven currencies, which would boost the US Dollar.
The GBP/USD exchange rate will continue to be driven by Brexit developments this week. If UK-EU negotiations show any signs of improvement, then we could see Sterling head higher.