Pound Sterling US Dollar (GBP/USD) Exchange Rate Jumps Over 1%
UPDATE: The Pound Sterling US Dollar (GBP/USD) exchange rate rallied by over 1.1% this afternoon. This left the pairing trading at around $1.2343.
The Pound received a further boost today after a Reuters report said the European Union are willing to shift its stance of fisheries.
According to Reuters, sources have said they would be willing to shift their stance on fisheries during next week’s negotiations with the UK.
This would be the first major concession from the EU, buoying GBP.
Commenting on this, head of G10 FX strategy at CIBC Capital Markets, Jeremy Stretch said:
‘Risk is definitely on and that’s keeping the Dollar on the defensive pretty much across the board. That EU story has helped to encourage the further move to the topside.’
Meanwhile, data from the US showed that consumer confidence had improved in May. This suggested the worst of the coronavirus-driven slump was over.
However, it would likely take a while to dig the country out of the hole as data showed record unemployment levels.
Pound Sterling US Dollar (GBP/USD) Exchange Rate Jumps as PM Announces Reopening of Shops
The Pound Sterling US Dollar (GBP/USD) exchange rate rallied by around 0.9% this morning. This left the pairing trading at around $1.2312.
The Pound rose against a weaker Dollar overnight and continued to make gains during Tuesday’s session.
GBP rose as Prime Minister Boris Johnson announced plans to reopen thousands of high street shops, shopping centres and department stores in June.
Johnson said:
‘Today, I want to give the retail sector notice of our intentions to reopen shops, so they too can get ready. There are careful but deliberate steps on the road to rebuilding our country.’
In Monday’s news conference, the Prime Minister said that outdoor markets and car showrooms could reopen from 1 June. He also added that all other non-essential retail would reopen from 15 June if tests are met.
This boosted Sterling, and in a note to clients, ING strategists wrote:
‘GBP is enjoying a brief reprieve after a tough couple of weeks, potentially buoyed by the news that the UK retail sector will open up in mid-June.’
US Dollar (USD) Falls as Risk Appetite Recovers
Meanwhile, the US Dollar suffered losses as optimism about a global recovery from the coronavirus crisis boosted riskier assets such as Sterling.
However, gains were limited as tensions between the US and China escalated again this week.
Commenting on this, CMC Markets’ chief strategist, Michael McCarthy said:
‘Markets are caught between two conflicting currents. Rising tensions between China and the U.S. are raising concerns, while easing COVID-19 lockdown measures are fuelling growth optimism.’
Tensions over Hong Kong increased this week as China’s foreign ministry office and Hong Kong’s security chief defended Beijing’s proposed security laws.
US-China relations continued to deteriorate as White House National Security Advisor, Robert O’Brien said the proposed legislation could lead to US sanctions on both China and Hong Kong.
Pound US Dollar Outlook: Will Risk Appetite Buoy GBP?
Looking ahead, the Pound (GBP) could make further gains against the US Dollar (USD) following the release of April’s Chicago Fed National Activity Index.
If April’s data does not improve as much between March and April, it will leave the ‘Greenback’ under pressure.
Meanwhile, Sterling could continue to benefit if risk appetite amongst investors continues to improve.
If optimism jumps, traders will move away from traditional safe-haven currencies and the Pound US Dollar (GBP/USD) exchange rate will rise.