Pound to US Dollar Exchange Rate Rises on UK Covid-19 Vaccine Confidence
The Pound to US Dollar exchange rate rose by 0.6% today following positive comments from Nicola Sturgeon, the First Minister of Scotland, that the vaccination programme is showing ‘compelling evidence’ of working. The pairing is currently fluctuating around $1.39.
Today also saw news that coronavirus cases in England had fallen by two-thirds in a month, further buoying confidence in the UK economy as Downing Street begins to outline ways to reopen the economy.
Chancellor Rishi Sunak has also reportedly backed the UK Government’s plans to ease lockdown measures with a view to being ‘irreversible’.
An ally of Sunak commented:
‘We didn’t have a potentially permanent route out previously. So there is now hope that this will be the last lockdown and therefore everyone across government is taking more cautious approach.’
In UK economic news, today saw the accountancy body ICAEW announce that its latest business confidence index revealed a 5-year high for business morale.
Michael Izza, the ICAEW’s chief executive, said:
‘Rising confidence among businesses is an encouraging sign of things to come and a predicted growth in employment is good news for people who have lost their jobs over the past year.’
US Dollar Falls as US Jobless Claims Rise Above Forecasts
The US Dollar struggled against the Pound today following the publication of the latest US Continuing Jobless Claims, which rose above forecasts to 4.494 million.
Liz Ann Solders, chief investment strategist at Charles Schwab, said:
‘We’re still at the mercy of the virus, so it’s still a bifurcated economy.’
As a result, this has curbed some of the ‘Greenback’s gains as the outlook for the US economy remains largely uncertain.
However, yesterday’s release of the latest US retail sales and industrial production data, which beat forecasts, has buoyed confidence in the US economy.
Risk-on market mood, however, is limiting demand for the safe-haven US Dollar today. Instead, investors are seeking out riskier assets now that global Covid-19 cases continue to fall.
Added to this, widespread coronavirus vaccine rollouts are also buoying hopes that some of the world’s major economies could steady come back online in the months ahead.
Consequently, this has weakened demand for safe-haven assets as the outlook for the global economy continues to improve.
Could Sterling Head Higher on a Strong UK Services PMI?
Pound investors will be awaiting tomorrow’s publication of the flash UK Markit Services PMI, which is expected to rise to 40.7.
Any significant improvement in the UK’s largest sector, however, could further boost the GBP/USD exchange rate.
Tomorrow will also see the publication of February’s UK GfK Consumer Confidence gauge. If this is uplifted by hopes of easing lockdown we could also see Sterling rise.
US Dollar traders will be eyeing tomorrow’s publication of the US Markit PMI Composite data. Any improvement in the outlook for the US economy would be USD-positive.
The GBP/USD exchange rate could continue to head higher this week if the UK’s Covid-19 cases continue to drop alongside rising numbers of those receiving the vaccine.