US Dollar Buoyed in Risk-Off Trade as GBP/USD Attempts Recovery: Weekly Forecast

The GBP/USD exchange rate remained under pressure last week as the US Dollar surged in risk-off trade, while the Pound struggled on rising coronavirus cases and the possibility of an impending wave of UK job losses. However, the Pound to US Dollar exchange rate is rising rapidly this morning on renewed Brexit optimism.

 

Last Week: Durable Goods Orders Slowdown Fails to Dent US Dollar

The Pound tumbled at the start of last week as coronavirus cases rise at a worrying rate, prompting the UK government to introduce new restrictions that could last for the next six months and become stricter.

The UK government’s pledge to subsidise 22% of wages for workers in ‘viable’ jobs for six months as the furlough scheme comes to an end failed to sustain support for the Pound to US Dollar exchange rate, with concerns over rising unemployment growing.

At the same time, safe-haven demand drove the US Dollar higher, despite August’s US durable goods orders index showing slower-than-expected growth, dropping from July’s 11.7% to just 0.4%.

Although signs continue to point towards a loss of momentum within the world’s largest economy, a persistent sense of market risk aversion continued to shore up USD exchange rates.

 

Three Things to Watch Out for This Week

  1. Shifting Market Sentiment

The GBP/USD exchange rate will likely continue being driven by shifting market sentiment based on Brexit and the alarming rise of coronavirus cases in the UK, and globally. While the threat of stricter restrictions in the UK remain and the global economy struggles to recover, the US Dollar may find strength in safe-haven demand.

 

  1. US Presidential Debate

The first televised presidential election debate on Tuesday could leave USD exchange rates vulnerable this week. The contentious nature of the election will likely stoke volatility in the US Dollar as market sentiment reacts to developments.

 

  1. US Non-Farm Payrolls

Markets are likely to take encouragement if September’s unemployment rate falls from 8.4% to 8.2% as anticipated, signalling that the labour market is moving in the right direction.

While recent jobless claims figures have disappointed, a stronger showing from the non-farm payrolls report could lift the US Dollar against its rivals.

 

GBP/USD Exchange Rate Outlook

While the Pound to US Dollar exchange rate soars today after renewed optimism over a Brexit deal agreement, GBP/USD will stay sensitive to any Brexit headlines, US political uncertainty and coronavirus, which will drive market sentiment.

Louisa Heath

Contact Louisa Heath


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