GBP/USD Exchange Rate Sinks as US Economy Could Reopen as Early as May
The Pound to US Dollar (GBP/USD) exchange rate plummeted by -0.8% today, with the pairing currently trading around $1.251.
The US Dollar (USD) recovered today partly due to US President Donald Trump’s insistence on re-opening the doors to the world’s largest economy. Trump is also urging that individual governors to make the call to lift the lockdown orders.
The US President said he would go ahead and authorize ‘each individual governor of each individual state to implement a reopening and a very powerful reopening plan of their state.’
Now that some ‘Greenback’ investors are optimistic that the US economy could reopen as early as 1st May, market appeal for the US Dollar has correspondingly risen following a period of risk-on market mood.
US Dollar (USD) investors will be awaiting today’s release of the US Retail Sales report for March. The figure is expected to fall by -2% in the control group report, while the month-on-month gauge is expected to plummet from -0.5% to -8%.
As a result of today’s data, we could see the USD/GBP exchange rate edge higher as the world’s largest consumer-driven economy confirms fears of a deep recession and increases demand for safe-haven currencies like the US Dollar.
GBP/USD Exchange Rate Falls as Chancellor ‘Deeply’ Concerned About UK Economy
The Pound (GBP) fell against the US Dollar (USD) after Chancellor Rishi Sunak admitted that he was ‘deeply’ concerned about the Office for Budget Responsibility’s (OBR) dire prediction of a -35% slump in UK GDP in the second quarter.
The OBR also stated that there could be as many as 2 million job losses due to the nationwide coronavirus lockdown.
Paul Johnson, the Director of the Institute for Fiscal Studies, comments:
‘We must not underestimate just how staggering these figures are, and by how much the economic outlook has shifted compared to just a few months ago.’
Sterling has weakened as market attention has shifted away from Prime Minister Boris Johnson’s recovery from the coronavirus to more immediate concerns about the UK’s darkening economic outlook.
We could see the GBP/USD exchange rate recover if the new Labour Party leader Keir Starmer’s request for a UK lockdown exit strategy is granted. This would provide further clarity for the UK’s economic situation going forward.
GBP/USD Forecast: US Jobless Claims in Focus
US Dollar (USD) investors will be awaiting tomorrow’s release of the US Initial Jobless Claims report for April. Any indication of increasing unemployment could further boost the ‘Greenback’ as investors become concerned over the health of the global economy.
Pound (GBP) traders will be keeping a close eye on the UK’s economic developments going forward, with any signs of increasing coronavirus cases weakening the GBP/USD exchange rate.