The Pound to US Dollar (GBP/USD) exchange rate has been continuing to climb since markets opened today. Concerns that the Federal Reserve could signal looser monetary policy this week is weighing on the US Dollar, but the Pound’s gains are limited amid a lack of particularly strong support for the British currency.
Last Week: Broad USD Weakness Allows for GBP/USD Gains
The Pound saw highly mixed movement last week. In the middle of the week, the Pound was hit by speculation that the UK government could walk away from UK-EU Brexit negotiations without a deal, leading to a no-deal Brexit.
However, at the end of the week the Pound did find a little support as UK retail and PMI data beat forecasts. Sterling was able to advance more easily overall though due to the US Dollar’s persisting weakness.
Investors have been increasingly hesitant to buy the US Dollar. The nation’s coronavirus situation continues to worsen with cases surging, and US data is showing more and more signs that the pandemic is having a negative impact on economic performance.
Three Things to Watch For This Week
- Federal Reserve Policy Decision
This week’s biggest event is the Federal Reserve policy decision, set for Wednesday afternoon. Investors are anxious that the Fed could signal more dovish monetary policy, which would lead to USD weakness.
2. US Growth and Inflation Data
US growth data from Q2 is due on Thursday, with PCE inflation data due on Friday. These could boost USD support if they beat forecasts as they are expected to be gloomy.
3. Coronavirus Developments
The coronavirus pandemic continues to worsen in the US. If the situation worsens further, the US Dollar may become increasingly unable to benefit from safe haven demand.
The US Dollar’s appeal as a safe haven has been dented by US coronavirus fears, and the Pound to US Dollar exchange rate could keep climbing if the Federal Reserve’s tone becomes more dovish.