Bank of England and Brexit Weigh on Pound Sterling to US Dollar (GBP/USD) Exchange Rate

Pound to US Dollar (GBP/USD) Exchange Rate Hit by Coronavirus, BoE, Brexit 

The Pound Sterling to US Dollar (GBP/USD) exchange rate is on track to end this week lower. It comes as a variety of factors weigh on the Pound (GBP). Meanwhile, the US Dollar (USD) finds support in global coronavirus concerns. 

After opening this week at the interbank level of 1.25, GBP/USD trended higher for a few days. Since yesterday though, GBP/USD has come under fresh pressure. 

GBP/USD shed over a cent yesterday alone, tumbling to the interbank level of 1.24. This was the lowest level for the pair since the beginning of the month. 

At the time of writing on Friday, GBP/USD continues to trend in the 1.24 region. 

Pound (GBP) Exchange Rates Fail to Capitalise on Retail Sales Rebound 

This morning saw the publication of Britain’s May retail sales results. The data showed a bigger than expected rebound in activity. Retail sales jumped 12% in May following the –18% contraction in April. 

Analysts noted that this optimistic monthly reading still contrasted with a gloomy –13.1% yearly-reading. This figure was also much better than forecast, however. 

Other factors continue to weigh on Sterling (GBP) too. 

The Pound was hit yesterday, by news that the Bank of England (BoE) was hesitant to do whatever it takes to support Britain’s economy. The bank has also still not ruled out negative interest rates. 

US Dollar (USD) Exchange Rates Holding Ground as Safe Haven Demand Rises 

The US Dollar (USD) seems on track to register gains this week. Fears of a potential ‘second wave’ of coronavirus infections are rising, and investors are looking for safer assets as a result. 

The US Dollar is traditionally a safe haven currency. While its appeal has been softened by concerns over how the US economy will be impacted by the coronavirus pandemic, it is still benefitting from safe haven demand today. 

There has been a rise in infections in major economies this week. 

According to Analysts from Commerzbank: 

‘Even if we do not see a ‘second wave’, a renewed rise in infection numbers illustrates that things are not going to return to normal for a long time’ 

Pound to US Dollar (GBP/USD) Exchange Rate Investors Await PMIs Next Week 

The bad news just keeps stacking up on the Pound (GBP) lately. As a result, it’s unlikely that the British currency will find much ground next week unless upcoming UK data is highly impressive. 

Britain’s June PMI projections will be published on Tuesday. If the data beats forecasts it could bolster hopes that Britain’s economy is rebounding from the coronavirus pandemic. 

However, due to criticism over the government and Bank of England’s (BoE) handlings of the pandemic, Sterling could remain weak even if data impresses. 

On the other hand, weak UK PMI data could knock Sterling down even lower. 

The US economic outlook remains filled with coronavirus concerns as well. 

However, if global ‘second wave’ fears continue to worsen, investors may be more and more eager to buy safe havens. 

US PMI data and growth results due next week could also influence the Pound to US Dollar (GBP/USD) exchange rate. 

Josh Jeffery

Contact Josh Jeffery