The Pound to US Dollar (GBP/USD) exchange rate is holding its ground this morning. It has been able to sustain almost all of last week’s huge gains, despite a lack of support for Sterling. This is largely due to broad losses in the US Dollar, in response to the dire US coronavirus outlook.
Last Week: Coronavirus Fears Send US Dollar Hurtling
Investors piled into the Pound to US Dollar exchange rate last week. While there hasn’t been much solid support for the Pound lately, the currency was able to capitalise on worsening US Dollar weakness.
The US Dollar outlook has become increasingly dominated by coronavirus fears. Markets are concerned with how the US government has handled the pandemic. US data and the Federal Reserve are both showing signs of a prolonged period of economic weakness.
Sterling was able to capitalise on US Dollar losses as the UK coronavirus outlook was seen as more competent in comparison. This is despite the UK government also coming under criticism for mixed clarity in its new coronavirus lockdown plans.
Three Things to Watch For This Week
- Final July PMIs
July’s final UK and US PMIs will be published through the first half of the week. If the US ISM data comes in much higher than forecast it could soften coronavirus pandemic fears slightly. This could improve USD support.
2. Bank of England Policy Decision
The Bank of England (BoE) will hold its August policy decision on Thursday. Though no surprises are expected from the bank. Fresh dovish signals or ultra-loose policy hints could cause the Pound to shed some of its recent gains.
3. US Non-Farm Payrolls
Perhaps this week’s biggest dataset will be Friday’s US Non-Farm Payrolls job market report. If the US job market is weathering the pandemic better than expected, it could help to support the US Dollar outlook.
Slews of major US data are due for publication this week. If the data beats forecasts it could soften US coronavirus fears, but worse data could have the opposite effect. Thursday’s Bank of England (BoE) policy decision will also be vital for forex movement this week.