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Will GBP/USD Slide on Increased US Consumer Optimism?

Pound Sterling and US Dollar notes

Pound US Dollar (GBP/USD) Exchange Rate Narrows amid Shifting Market Mood

The Pound US Dollar (GBP/USD) exchange rate is trading in narrow bounds this morning, as a fragile market mood brings bearish trade.

At the time of writing, GBP/USD is trading at around US$1.2117, showing little movement from the morning’s opening rates.

US Dollar (USD) to Rally on Increased Consumer Optimism?

The US Dollar (USD) could see strength later in today’s session, with the release of the latest Michigan consumer sentiment index.

March’s consumer optimism levels are expected to rise, based on past data trends. If this prints accurately, the ‘Greenback’ could close the week on a high note due to the US’ predominantly consumption based economy.

However, recent turmoil in the US and European banking sectors has created market anxiety. Yesterday, First Republic Bank received a $30 billion stimulus, as larger US banks moved to assist by buying up deposits. With this, they managed to stave off a collapse and inspired a risk-on market mood.

If this market mood continues, the US Dollar could remain downbeat ahead of this afternoon’s data, due to it’s safe-haven nature.

Early next week, a lack of data releases may mean the picture remains similar. If the turmoil across the banking sectors continues, USD could open the week on an upbeat note due to bearish trade. However, if a recovery is cemented, the ‘Greenback’ could weaken on the optimism.

Pound (GBP) to Narrow amid Lack of Data?

For the Pound (GBP), a thin calendar in terms of data releases may leave the currency vulnerable to shifts in market sentiment.

As GBP has an increasingly risk-sensitive nature, a souring market mood may weigh heavily on Sterling as the week draws to an end.

However, with talks between unions and ministers beginning to bear fruit after days of industrial action, any news of a resolution could bring cheer to GBP investors. The NEU, and other teaching unions, have agreed to enter further talks with the aim to end the strikes.

Into early next week, data releases remain thin on the ground for Sterling. Because of this, further developments in the recent banking crisis may have an effect on the currency.

If further news comes over the weekend of banking collapses, GBP could suffer on a sour market mood. However, if news of resolution and increased support comes, the Pound may see a boon as optimism covers the markets.

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