Pound to US Dollar (GBP/USD) Exchange Rate Steady as US Stimulus Hopes Return

GBP/USD Exchange Rate Rangebound as Donald Trump Restores Hope of Covid-19 Stimulus

The Pound to US Dollar (GBP/USD) exchange rate held steady today, with the pairing currently fluctuating around $1.292.

The US Dollar (USD) retreated today after tweets from US President Donald Trump suggested that he would now be open to some aspects of Covid-19 stimulus measures.

Consequently, this has limited the safe-haven appeal of the ‘Greenback’, with investors now seeking out riskier assets instead.

Analysts at Reuters also commented:

‘Markets are also starting to price in a Democratic sweep during the U.S. election in November as new polls show former Vice President Joe Biden with a firm lead. Investors see such an outcome making the passage of a new stimulus bill more likely.’

In US economic data, today will see the release of the latest Initial Jobless Claims for October.

If US unemployment continues to fall, we could see the USD sink as risk-sentiment improves.

However, US economic news is likely to be overshadowed by growing political uncertainty ahead of November’s election.

As a result, we could see the US Dollar swiftly rise if uncertainties rise, as this would boost demand for safe-haven currencies like USD.

Pound (GBP) Steady Despite Dovish Bank of England Forecast

The Pound (GBP) struggled to gain against the US Dollar (USD) today after the Bank of England’s (BoE) Governor, Andrew Bailey, warned that risks for the British economy remain on the downside.

Mr Bailey said:

‘There is an unprecedented level of uncertainty at the moment. And the risks, I’m afraid – certainly as we see them – are very much on the downside.’

Meanwhile, Brexit has taken centre stage, with Downing Street now under more pressure with the October 15th deadline just around the corner.

Italy’s Prime Minister, Giuseppe Conte, has also urged the British Government to step up to committing to a post-Brexit trade deal.

Mr Conte said:

‘I believe there will be an agreement in the end … and trust that the British government will be willing to reach one that ensures reciprocal advantages.’

GBP investors are also remaining cautious after UK hospitals warned that they were now just 10-days away from a ‘critical stage’ because of rising Covid-19 cases.

Consequently, Pound (GBP) investors are remaining cautious as the outlook for Britain’s economy continues to darken.

GBP/USD Forecast: Could a Brexit Deal Breakthrough Boost Sterling This Week?

Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK Industrial Production data for August. If figures these fall, then we could see the GBP compromised as fears grow over Britain’s economic performance in the months ahead.

Tomorrow will also see the release of the final UK GDP figure for August. The is expected to rise by 4.6%. However, with a dimming UK economic outlook, these are unlikely to boost optimism for the autumn and winter months.

Tomorrow will also see a speech from Andy Haldane, the BoE’s Chief Economist, if he reiterates the Bank’s dovish outlook, then Sterling would sink.

The US Dollar (USD) will be driven by global risk sentiment. Any further complications ahead of the November elections could bolster the safe-haven ‘Greenback’.

The GBP/USD exchange rate will remain influenced by Brexit developments into the weekend. With just a week to go before the October 15th deadline, any signs of a post-Brexit trade deal breakthrough would boost Sterling.

David Moore

Contact David Moore