After markets opened this morning, the Pound to US Dollar (GBP/USD) exchange rate briefly jumped. Much like last week though, resilient safe haven demand and a lack of strong support meant GBP/USD was unable to sustain this advance attempt, and the pair fell again.
Last Week: Safe Haven Demand Fluctuates but Sterling Weakness Persists
The Pound to US Dollar exchange rate spent most of last week trending higher. This was due to global hopes for recovery from the coronavirus pandemic as well as US economic concerns, limiting the US Dollar’s appeal as a safe haven.
However, global coronavirus ‘second wave’ fears have continued to rise due to a spike in cases.
As a result, safe haven demand has been gradually rising and rising. Even with the US coronavirus outlook especially bad, the US Dollar is still benefitting from market demand for safe havens.
This, as well as a lack of support for Sterling amid coronavirus and Brexit fears, is keeping the Pound to US Dollar exchange rate from advancing.
Three Things to Watch For This Week
- Global Coronavirus Developments
The global number of coronavirus deaths has risen beyond 500,000, and fears of a ‘second wave’ are surging. Unless global governments ramp up efforts to prevent a ‘second wave’, safe haven demand could surge higher and boost the US Dollar.
- Brexit Developments
UK-EU Brexit negotiations are set to continue this week. However, unless there are any notable developments, the Pound may only be in for further Brexit weakness.
- Fed Meeting Minutes
The biggest item on this week’s calendar is the Federal Reserve meeting minutes report, due Wednesday evening. If the Fed is perceived as more dovish than expected on the coronavirus outlook, the US Dollar’s appeal could be limited.
While many key UK and US ecostats are due for publication this week, market shifts in coronavirus and risk-sentiment will remain the most influential things for Pound to US Dollar exchange rate movement.