Pound to US Dollar (GBP/USD) Exchange Rate Steady as Improving Risk Sentiment Drags on ‘Greenback’

GPB/USD Exchange Rate Rangebound as Coronavirus Cases Decrease Worldwide

The Pound to US Dollar (GBP/USD) exchange rate held steady today, with the pairing currently trading around $1.261.

The US Dollar (USD) shed some of its gains today as risk-sentiment has improved on a lessening number of coronavirus cases worldwide. Oil prices and shares have also recovered from yesterday’s sell-off.

Meanwhile, the number of coronavirus cases across America have also decreased, buoying hopes that the world’s largest economy could begin to restart its economic activity.

This week saw the US Dollar (USD) suffer from increased risk sentiment, with traders flocking for riskier assets after coronavirus cases and hopes for the global economy’s recovery grew.

However, Wednesday saw the US Federal Reserve paint a gloomy picture for the American economy, with the Fed saying that the US economy could shrink by 6.5% this year.

Analysts at Reuters also noted:

‘A month into efforts to broadly reopen the U.S. economy there is little clarity either on the pace and durability of the recovery, or on the ability to convincingly suppress the virus that has killed more than 112,000 Americans.’

Coming up today, the flash US Michigan Consumer Sentiment Index for June is expected to improve from 72.3 to 75.

Pound (GBP) Steady as UK Growth Hits Record Lows in April

The Pound (GBP) suffered today after the UK’s GDP figures for April fell by a worse-than-expected -20.4%. This was the largest drop on record, even outpacing 2008’s financial crisis.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, commented on the data:

‘April’s fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost 10 times larger than the steepest pre-Covid-19 fall.’

Today also saw the release of the UK’s industrial production figures for April fall to record lows of 20.3%. Many analysts had warned that the UK’s manufacturing industry was on the brink of collapse.

As a result, Sterling has suffered today as UK economic data points to an unprecedented slump in the second quarter.

GBP/USD Outlook: Could Improving US Economic Data Improve Risk Sentiment?

US Dollar (USD) investors will be looking ahead to Tuesday’s release of the US retail sales figures for May. However, if these show any signs of improvement, we could see the ‘Greenback’ suffer.

Tuesday will also see Jerome Powell, the Chair of the Fed, deliver a speech before Congress. Any further dovish comments about the American economy could begin to weigh on the USD.

The GBP/USD exchange rate is likely to remain subdued into next week. UK economic data is expected to continue to drag on confidence in the British economy’s recovery.

However, if Downing Street announces any steps to ease lockdown measures, we could see Sterling recover.

David Moore

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