Pound to US Dollar Exchange Rate Holds Highs but Bank of England Ahead
Update 16:4o BST 31/07/2020:
As July drew to an end today, the Pound Sterling to US Dollar (GBP/AUD) exchange rate trended near its best levels.
Despite a lack of fresh support for the Pound (GBP) this week, the British currency has surged. It has gained especially strongly against the US Dollar (USD).
GBP/USD touched on a high of 1.3165 this afternoon. This was the best level for the pair since the beginning of February, almost half a year ago.
Before markets closed for the day, GBP/USD trended just below these highs.
The US Dollar found no notable support in the day’s mixed US PCE inflation rate data.
Still, the Pound may struggle to keep climbing over the coming week if the Bank of England (BoE) disappoints markets.
(Originally published 10:27 BST 31/07/2020)
Pound to US Dollar Exchange Rate Keeps Climbing amid Broad US Dollar Weakness
The US Dollar (USD) was on track to end this week with its worst month in a decade, leading to impressive gains for the Pound Sterling to US Dollar (GBP/USD) exchange rate. However, Sterling’s (GBP) potential for gains remains limited.
Since opening this week, GBP/USD has seen highly impressive, major gains as the US Dollar plummets.
GBP/USD opened this week in the interbank region of 1.27 and has been climbing solidly ever since. At the time of writing on Friday, GBP/USD trended over three cents higher in the region of 1.31.
This was the best level for GBP/USD since the beginning of February, almost half a year ago.
While some analysts are concerned about the US outlook though, Britain’s outlook isn’t hugely optimistic either. As some parts of Britain see new lockdown, the Pound may see new pressure going forward.
Pound (GBP) Exchange Rates Gaining Versus Rivals despite UK Lockdowns
The Pound (GBP) is seeing solid gains this week, due largely to broad weakness in major rivals like the US Dollar (USD).
While the US Dollar slumps on US coronavirus and Fed concerns, the Pound is able to gain against it and other major currencies as well.
However, the Pound is still lacking in domestic support. In fact, concerns about Britain’s economic outlook persists.
Overnight, the UK government announced plans for fresh lockdowns in some northern regions of England. Greater Manchester, West Yorkshire, Leicester and some parts of East Lancashire would see fresh lockdown restrictions.
For now its impact on the Pound has been limited. Still, some politicians have criticised the government for not clearly signalling and communicating new lockdown plans.
US Dollar (USD) Exchange Rates Throttled by Coronavirus, Fed, Trump
The US Dollar (USD) has been hit especially hard in the past week. Despite higher market demand for safe havens, the US Dollar’s safe haven appeal has unravelled as investors become increasingly anxious about the health of the US outlook.
A gloomy US economic outlook, a worsening coronavirus pandemic, and political uncertainties have created a perfect storm for US Dollar selling.
US growth was even weaker than expected when published yesterday. On top of this, US President Donald Trump has floated the idea of the upcoming US Presidential Election being delayed which has also caused panic.
According to Rat Attrill, Head of FX Strategy at National Australia Bank (NAB):
‘The mere suggestion by Trump of a delay does play to concerns that the election result will be challenged in November (should Trump lose)’
Pound to US Dollar (GBP/USD) Exchange Rate to Remain High even if US Data Impresses
This week’s slew of concerning US developments are likely to keep pressure on the US Dollar (USD) for quite some time.
In fact, investors may simply brush over this afternoon’s upcoming US inflation stats even if they beat forecasts.
US Personal Consumption Expenditure (PCE) inflation data from June will be published this afternoon. While this is the Federal Reserve’s preferred measure of US inflation, the bank has already signalled that more quantitative easing (QE) is likely.
As a result, these stats are unlikely to have a notable impact on the gloomy US Dollar. GBP/USD may be set to end July near its best levels in almost half a year.
More notable UK data will be published next week and the Bank of England (BoE) will hold its August policy decision.
Unless there are some optimistic UK developments though, the Pound to US Dollar (GBP/USD) exchange rate may lack the drive to advance much further.