Pound US Dollar Exchange Rate Pressured Ahead of UK Budget

GBP/EUR – Budget Anticipation Puts Pressure on Pound

Anticipation ahead the 2021 Budget announcement kept the Pound under a degree of pressure amid speculation over its possible details.

If the government follows through with a greater level of financial support for struggling businesses, this could encourage GBP exchange rates to trend higher across the board.

Greater fiscal support for the economy could help to shore up growth in the coming months, reducing the risk of any potential contraction in the second quarter.

As long as markets see reason to bet that the UK economy could recover its lost momentum sooner rather than later, the Pound could gain boost against its rivals, even with the national lockdown still in place.

GBP/USD – Pound Limited as UK Trade Concerns Mount

The Pound dipped going into last weekend as the GBP/USD exchange rate suffered from some end of month profit taking following a bullish run earlier in February.

Growing anxiety over reports of increasing delays at the UK border, and news that German exports to the country dropped 30% at the start of the year added to the souring mood towards Sterling.

Even if February’s construction PMI remains firmly planted in expansion territory tomorrow, the Pound will likely struggle to make significant gains on the data.

Instead, market sentiment and the UK’s coronavirus situation will drive more movement, as while the vaccine rollout success continues, the emergence of new variants threatening a delay to restrictions easing has created some caution among GBP investors.

USD/GBP – Signs of Labour Market Recovery Boost US Dollar

An unexpectedly strong surge in durable goods orders helped to lift demand for the US Dollar last week, with signs pointing towards increased domestic confidence.

Investors also took encouragement from a lower-than-forecast increase in the latest initial jobless claims figure, which suggests that the labour market started to recover some of its ground.

Signs of a similar improvement in February’s non-farm payrolls report may well encourage the US Dollar to make solid gains on Friday.

A strong increase in payrolls after January’s lacklustre performance could stoke bets that the labour market decline has bottomed out, offering USD exchange rates a leg up across the board.

EUR/USD – Drop in German Retail Sales Weighs on Single Currency

Solid improvements in the German consumer confidence and Eurozone business sentiment indexes offered the Euro a boost last week.

However, as German retail sales delivered another sharp decline on the month, the single currency was knocked off its positive footing.

The appeal of the Euro could prove limited in the days ahead, with confidence in the underlying health of the Eurozone’s powerhouse economy fading.

If Eurozone retail sales also show a fresh decline in January, this may add to the downside bias of EUR exchange rates, as the impact of Covid-19 continues to weigh on the outlook of the currency union.