Hopes for Easing of Lockdowns Buoys the Pound Sterling US Dollar (GBP/USD) Exchange Rate
The Pound Sterling US Dollar (GBP/USD) exchange rate rose by around 0.5% on Monday morning. This left the pairing trading at around $1.2452.
Sterling received an upswing of support on optimism that Britain may soon ease the country’s lockdown measures.
According to national medical director of the country’s health service, Britain is now seeing a downward trend of coronavirus hospitalisations.
Meanwhile, risk appetite improved as Italy is preparing to gradually lift restrictions.
Last night, Prime Minister, Giuseppe Conte said that the measures would be relaxed in Italy from the 4 May.
Added to this, sentiment was boosted as markets expect Spain to follow suit. The country is expected to announce an easing of measures from 2 May.
Meanwhile, Sterling rose after reports revealed the Prime Minister, Boris Johnson had recovered from coronavirus and was returning to work.
Johnson is now expected to find a way to ease lockdown measures without triggering a second wave of the virus.
According to Michael Hewson, chief market analyst at CMC Markets UK:
‘Attention will be on him, and in particular the government more broadly, to announce some sort of pathway out of lockdown, as it becomes increasingly apparent how much economic damage is being done to the UK economy.’
Federal Reserve in Focus This Week
Markets are now shifting their focus to the US Federal Reserve’s meeting on Wednesday and the European Central Bank’s (ECB) meeting on Thursday.
The world’s major central banks are expected to take the stage again this week as the world economy deals with a massive contraction in growth.
However, analysts have said that the US central bank has announced measures and is expected to leave rates on hold this month. This is unlikely to cause much movement for the Dollar.
Pound US Dollar Outlook: Fed Meeting and Risk Appetite in Focus
Looking ahead, the US Dollar (USD) could edge lower against the Pound (GBP) if market sentiment continues to improve.
If risk appetite increases and the British government announce any plans to begin to ease lockdown measures, Sterling sentiment will improve.
Meanwhile, markets will continue to look to Wednesday’s US Federal Reserve meeting. If policymakers are overly hawkish it could boost risk appetite further and send the Pound US Dollar (GBP/USD) exchange rate higher.