GBP/USD Exchange Rate Rangebound as US Markets Await Fed Interest Rate Decision
The Pound US Dollar (GBP/USD) exchange rate held steady today ahead of the US Federal Reserve’s interest decision. The pairing is currently fluctuating around $1.38.
The US Dollar (USD) failed to rise against Sterling as the US Federal Reserve is expected to hold interest rates at 0.25% later on today.
Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, commented:
‘The Fed is trying to convey a very dovish tone as long as the pandemic remains a threat. Until we get to that point, they are going to continue to say the economy is getting better but we need to see more evidence. We are not out of the woods yet.’
As a result, ‘Greenback’ investors are remaining cautious as any dovish comments from the Fed could limit confidence in the US economy.
However, if global risk sentiment continues to sour because of rising Covid-19 cases in India, then demand for the safe-haven US Dollar could quickly pick up.
Pound (GBP) Exchange Rate Steady Despite Growing Confidence in Britain’s Economy
The Pound (GBP) failed to rise against the ‘Greenback’ today despite the CBI reporting that retail sales had risen at their fastest rate since 2018 thanks to the UK’s progress with Covid-19 vaccines.
Ben Jones, the principal economist at the CBI, commented that the retail sector had fared relatively well during the coronavirus pandemic.
However, Jones also added:
‘Retailers are still facing challenges around inventory management and their supply chains, amid trade disruption, big shifts in consumer behaviour and uncertainty over how long some degree of social distancing could remain in place.’
Britain’s economy is now set to see faster growth than the United States this year as the nation races ahead with its vaccination programme.
Goldman Sachs commented:
‘The UK economy is rebounding sharply from the Covid crisis. The April flash PMI was much stronger than expected in the UK, with the services PMI moving strongly further into expansionary territory.’
As a result, the Pound (GBP) could begin to edge higher this week if confidence in the British economy continues to grow.
Pound US Dollar Exchange Rate Forecast: US GDP Data in Focus
US Dollar (USD) traders will be awaiting tomorrow’s release of the flash US GDP data for the first quarter.
Any significant improvement in the outlook for the US economy could weaken demand for the safe-haven ‘Greenback’.
The US economy is the largest in the world, with any signs of growth in largest economy buoying confidence in the larger global situation.
The Pound US Dollar (GBP/USD) exchange rate could begin to edge higher this week if confidence in the UK economy continues to increase.