Pound US Dollar (GBP/USD) Exchange Rate Edges Higher as US Business Optimism Dwindles Amid Covid-19 Fears

GBP/USD Exchange Rate Rises as Safe-Haven Demand Plummets as Europe Eases Lockdowns

The Pound to US Dollar (GBP/USD) exchange rate rose by 0.1% today after US NFIB Business Optimism fell to a worse-than-expected 90.9 in April. The pairing is currently trading around $1.235.

William Dunkelberg, the Chief Economist at NFIB, commented:

‘The full force of the recession has not yet been felt as programs such as PPP encourage firms to maintain employment even as the government shutdown reduces business activity.’

Meanwhile, the ‘Greenback’ has suffered from sell-off as investors increasingly favour riskier assets. This follows US President Donald Trump’s hailing of success over the coronavirus despite US deaths passing 80,000.

Mr Trump told reports at a White House briefing on Monday that, ‘We have met the moment, and we have prevailed.’

As a result, the US Dollar (USD) has suffered due to investors flocking to riskier assets amid hopes that the Eurozone’s economy could recover. The bloc’s major economies such as France and Germany continue to ease their lockdown measures.

Nonetheless, US Dollar (USD) investors will be eyeing today’s release of the US CBI data for April.

Pound (GBP) Rises as UK Health Secretary Announces Easing Care Home Deaths

The Pound (GBP) edged higher against the ‘Greenback’ today after UK Health Secretary Matt Hancock commented that Covid-19-related care home deaths had fallen since the last week of April.

Matt Hancock told BBC’s Radio 4 this morning:

‘I’m really pleased that the number of people dying in care homes is now falling, quite sharply. The number has almost halved over the past two to three weeks, since the peak.’

‘It’s very clear to me that the transmission in care homes is coming down and is much lower than it was.’

However, Sterling is being held back over growing fears over the possibility of a second-wave of the coronavirus. Furthermore, today saw scientists warn of the UK’s rolling back of lockdowns which could cause further outbreaks without a ‘robust UK strategy’.

Looking ahead to this evening, GBP investors will be awaiting April’s BRC retail sales report. If this falls below consensus and paints a dark picture of the British economy, then we could see the Pound fall.

GBP/USD Forecast: Could Sterling Sink on Weak Q1 Growth Data?

Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK’s flash GDP figure for the first quarter. However, if Britain’s growth falls markedly below consensus, then we could see Sterling suffer.

Tomorrow will also see the release of March’s UK industrial production gauge. Any signs of the UK manufacturing sector suffering earlier in the year would prove Pound-negative.

Meanwhile, US Dollar investors will be looking ahead to tomorrow’s speech from US Federal Reserve Chairman, Jerome Powell. If he is notably dovish in his speech, then we could see the US Dollar fall.

The GBP/USD exchange rate will continue to be driven by coronavirus developments this week. However, UK economic data could also begin to drag down Sterling as the UK’s economic future continues to darken.

David Moore

Contact David Moore