GBP/USD Exchange Rate Rangebound as Fed Signals Steady Policy Going Forward
The Pound to US Dollar exchange rate held steady today, with the pairing currently trading around $1.41.
The US Dollar suffered today after risk-sentiment significantly improved.
This follows comments from Fed Chairman Jerome Powell which signalled that the Fed would continue buying bonds despite the outlook for the American economy improving.
Cornerstone Macro analysts Roberto Perli and Benson Durham commented:
‘[Mr Powell] gave absolutely no indication that the Fed is thinking about changing its very dovish policy stance.’
As a result, demand for safe-haven currencies such as the ‘Greenback’ has been eased-off as the outlook for the global economy improves.
Additionally, falling Covid-19 infection rates worldwide is also driving investors to seek out riskier assets.
In US economic news, today saw US jobless claims fall last week amid winter storms.
Nevertheless, the outlook for the American economy – the world’s largest – remains relatively stable.
As a result, we could see demand for the ‘Greenback’ begin to fall as the confidence grows ion the global economic outlook.
Pound (GBP) Steady as Outlook for UK Economy Begins to Falter
The Pound suffered today as confidence in the UK economy has dwindled since this week’s announcement of a lockdown exit strategy.
Instead, GBP investors are becoming more cautious following reports that the number of UK workers on the furlough scheme had risen close to 4.7 million last month.
However, today saw the UK Covid-19 alert level drop to 4 as the threat of the NHS being overwhelmed has fallen.
UK Chief Medical Officers warned:
‘We should be under no illusions – transmission rates, hospital pressures and deaths are still very high. In time, the vaccines will have a major impact and we encourage everyone to get vaccinated when they receive the offer. However, for the time being it is really important that we all – vaccinated or not – remain vigilant and continue to follow the guidelines.’
Nevertheless, UK markets are remaining cautious after both Brexit and the Covid-19 pandemic has severely limited the nation’s economy over the previous year.
GBP/USD Forecast: Could an Improving Outlook for the UK Economy Drive Up Sterling?
US Dollar investors will be awaiting tomorrow’s release of February’s Michigan Consumer Sentiment.
Any improvement in the outlook for the US economy, however, could further weaken demand for the ‘Greenback’.
Meanwhile, the GBP/USD exchange rate will primarily be driven by the UK’s Covid-19 developments into the weekend.
If the outlook for the UK economy continues to improve, then we would see the Pound begin to edge higher against the ‘Greenback’.