Pound US Dollar (GBP/USD) Exchange Rate Steady as UK Economic Contraction Slows Slightly in May

GBP/USD Exchange Rate Rangebound Despite Dire Predictions for UK Economy

The Pound to US Dollar (GBP/USD) exchange rate held steady today, with he pairing currently trading round $1.22.

Sterling is rangebound with the US Dollar (USD) today after the UK’s economic contraction slowed slightly in May.

Today saw the release of the IHS Markit’s PMI for the whole economy rise from to 28.9 in May compared to the dismal 13.8 in April. However, this signalled a sharper contraction than 2008’s financial crisis and the lowest reading in the survey’s twenty-year history.

Chris Williamson, the economist at IHS Markit, commented:

‘Travel and tourism firms, hotels, restaurants and producers of consumer goods such as clothing were again the hardest hit, reflecting virus containment measures.’

‘But this remains a shockingly broad-based downturn with very few companies left unscathed.’

Meanwhile, Sterling traders are remaining cautious after various analysts highlighted the possibility that the UK could see a worse-than-expected downturn in the second quarter.

US Dollar (USD) Steady as US-China Tensions Flare-Up

The US Dollar (USD) held steady against the Pound (GBP) today despite a surge in demand for safe-haven assets after US President Donald Trump escalated tensions between the US and China.

Mr Trump once against criticised Beijing’s handling of the coronavirus situation, saying that China had failed to deflect the ‘pain and carnage that the country spread throughout the world’.

As a result, the ‘Greenback’ has benefited from a rise in safe-haven demand as the world’s two largest economies collide.

Xin Qiang, deputy director of the Center for American Studies at Fudan University in Shanghai, commented:

‘Trump’s tweets, in both the words he picked and the way he wrote them, are disgraceful.’

Looking ahead, today will see the release of the US Initial Jobless Claims report for May. However, if jobless claims continue to rise, we could see the US Dollar benefit as the world’s largest economy struggles.

Today will also see the Fed Chairman Jerome Powell deliver a speech. If Mr. Powell hints at further stimulus measures to bolster the economy, then we could see the US Dollar (USD) shed some of its gains.

GBP/USD Forecast: Could Sterling Begin to Sink on the UK’s Economic Gloom?

Pound (GBP) traders will be awaiting tomorrow’s release of the UK’s Public Sector Net Borrowing report for April. However, with borrowing set to grow to £35 billion, this would likely send Sterling downward.

Meanwhile, we could see the US Dollar (USD) edge higher as US-China trade relations continue to sour.

The GBP/USD exchange rate will remain dictated by the UK’s coronavirus situation this week. As a result, we could see the Pound begin to sink if the British economy continues to point towards a worse-than-expected recession later this year.

David Moore

Contact David Moore


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