The Pound to US Dollar exchange rate fell today, as a global risk-off mood pushes investors to buy into the safe-haven USD.
At the time of writing the pair are currently trading at around $1.3921.
Pound (GBP) Limits Losses on back of BoE Comments
The Pound has fallen ahead of the weekend as a risk-off mood and volatility in markets push the currency down.
However, Bank of England’s (BoE) chief economist Andy Haldane’s comments regarding UK inflation in the coming months has allowed the Pound to limit its losses today.
Speaking earlier today in an online speech, Haldane said:
‘People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.’
‘There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial market.’
Haldane’s comments followed a selloff of UK government bonds and rising bond yields, fuelling a risk-off mood that saw the Pound struggle.
US Dollar (USD) Supported by Global Risk-Off Mood
The US Dollar found itself supported again today as a rise in US Treasury yields, paired with a risk-off mood, pushed the currency higher.
Yields on the benchmark 10-year US Treasury note crossed the 1.6% level, which is the highest in over a year.
Analysts at ING commented on the rise in US yYields driving core yields higher globally:
‘This is turning into an inflation tantrum. In the end, a spot of tapering later in 2021 may be needed to offer some inflation protection to the back end.’
The surge in yields has caused riskier assets to suffer, and global risk-aversion has supported the US Dollar further, the PCE price Index is contributing to expectations for rising inflation which is adding to the risk-off mood.
Pound to US Dollar Outlook: UK Manufacturing PMI in Focus
Pound investors will be looking towards Monday as the final PMI manufacturing figures for February are released for the UK.
A slight growth is expected in the sector, which could prove GBP-positive.
US Dollar investors will be looking at the USA’s own ISM Manufacturing PMI release on Monday, which is forecast to show a slowdown in manufacturing for the month of February which could put pressure on USD.
The GBP/USD exchange rate will also be moved by a continuing risk-off mood and volatility in markets, which would push the US Dollar higher and cause the Pound to suffer.