Pound US Dollar (GBP/USD) Exchange Rates Strike New Multi-Year-Best as Sterling Rallies

Pound US Dollar Exchange Rate Pushes Higher amid US Dollar’s Persisting Weakness 

Investors are once again selling the US Dollar (USD) this week, making it easier for the Pound US Dollar (GBP/USD) exchange rate to strike fresh highs. Optimism over Britain’s coronavirus vaccination outlook keeps Sterling (GBP) appealing. 

Last week saw the US Dollar’s recovery rally attempt run out of steam. Continued Pound strength left GBP/USD surging from the interbank level 1.37 to 1.38 throughout the week. 

This week so far has seen even further strength in the Pound and further weakness in the US Dollar. At the time of writing, GBP/USD is trending near the interbank level of 1.39 – the best level for the pair since May 2018. 

Key stats including retail sales figures will be in focus for Pound and US Dollar exchange rate investors in the coming sessions. 

Pound (GBP) Exchange Rate Outlook Continues to Rise 

Investors continue to bet on the Pound, as analysts speculate that the biggest risks on the currency are receding. 

Some coronavirus and Brexit jitters weighed on Sterling in recent weeks. However, signs that Britain’s lockdown could begin to be eased in the coming month, as well as fading UK-EU trade tensions, mean there is little stopping investors from buying Sterling. 

According to Analysts at MUFG: 

‘The risk of an escalation of friction on the border between the UK and the EU appears to be receding now with data from a logistics company, Transporeon reporting that the rejection rate for cargo shipped from France to the UK had fallen to its lowest level since the last week of November.’ 

US Dollar (USD) Exchange Rates Stuck Near Lows amid Global Recovery Hopes 

The US Dollar is a safe haven currency. This means it is appealing in times of global uncertainty, but investors have less reason to hold onto it when markets are optimistic. 

Rising global expectations of recovery from the coronavirus pandemic are making investors more willing to buy other currencies over the US Dollar. According to Moh Siong Sim, Currency Analyst at Bank of Singapore:  

‘Things right now reflect greater comfort with the story of a synchronised global recovery, which is why we are seeing a weaker Dollar’ 

With no reason to keep holding onto the US Dollar, weakness in US job market data recently is only further dampening the US currency’s appeal. 

Pound US Dollar (GBP/USD) Exchange Rates Focused on Tomorrow’s US Data and Fed News 

US Dollar demand is still limited for now, but the US currency could see a jump in demand depending on tomorrow’s upcoming news. 

Wednesday’s European session will see the publication of Britain’s latest inflation rate data. This is unlikely to be hugely influential for the Pound, but US data due later in the American session could cause movement if it surprises. 

US retail sales from January will be published and will give markets a better idea how US consumer activity is holding up. Stronger than expected US retail activity could boost hopes for US economic resilience and this could give the US Dollar stronger support. 

Later during Wednesday’s American session, Federal Reserve meeting minutes data will be published.  

If the Fed shows more signs of becoming more dovish, the US Dollar will become even less appealing and GBP/USD may rally higher. 

On the other hand, a surprisingly optimistic Federal Reserve that avoids dovishness could lead to a big rise in US Dollar demand and the Pound US Dollar (GBP/USD) exchange rate could recoil from multi-year highs. 

Josh Jeffery

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