Pound Euro Steady as UK Markets Await Bank of England’s Rate Decision, GBP/USD
GBP exchange rates are trading in a narrow range so far today. The Pound Euro exchange rate is holding steady, trading around €1.17, while the GBP/USD is also rangebound and fluctuating around $1.39.
Sterling has performed strongly over the past few weeks. GBP investors are more optimistic that the UK could recover its economy in the next few months as lockdowns are eased.
Bank of England (BoE) Governor Andrew Bailey also commented that he was ‘more positive’ about the outlook for Britain’s economy.
Mr Bailey said there are now ‘upside risk’s to the Bank’s growth forecasts but warned that new variants of the coronavirus could quickly derail the nation’s economic recovery.
He told BBC Radio 4’s Today Programme:
‘We have seen some increase in interest rates over the last month or so, as have other countries. My assessment so far is that that is consistent, I think, with the change in the economic outlook.’
Due to a lack of notable UK economic data this week, GBP traders are awaiting Thursday’s BoE interest rate decision.
Although it’s widely forecast that the BoE will hold interest rates at 0.1%, any further bullishness from key policymakers could drive up the Pound Euro and Pound US Dollar exchange rates.
Euro Pound Exchange Rate Struggles as EU Faces a Third Covid-19 Wave, EUR/USD Slips to $1.18
The Euro is struggling this week following reports that the European Union (EU) is facing a third-wave of Covid-19 infections advancing throughout much of Europe.
The EUR/GBP exchange rate is currently fluctuating around £0.85, while the EUR/USD exchange rate is currently trading around the lower end of $1.19.
Italy reported more than 27,000 new cases of the virus and 380 deaths last Friday.
Italian prime minister Mario Draghi commented:
‘More than a year after the start of the health emergency, we are unfortunately facing a new wave of infections. The memory of what happened last spring is vivid, and we will do everything to prevent it from happening again.’
As a result, EUR investors have become more concerned about the outlook for the Eurozone’s economy, which could be severely compromised by a third-wave of coronavirus cases.
Added to this, Europe’s delay of Covid-19 vaccine rollouts has left it lagging behind countries like the United Kingdom.
This has sparked concerns over the bloc’s ability to recover its economy throughout the spring and summer months.
Yesterday saw the Eurozone’s ZEW Survey of Economic Sentiment improve in March, however, with the figure rising from 69.6 to 74.
Nevertheless, EUR traders will be keeping an eye on Europe’s Covid-19 situation. If lockdowns are once again enforced, however, then the EUR/GBP and EUR/USD exchange rates would suffer.
US Dollar (USD) Edges Higher as Risk-Off Market Mood Persists
The US Dollar rose over the past week thanks to prevailing risk-off mood driving demand for the safe-haven ‘Greenback’.
With the European Union (EU) facing another influx of rising Covid-19 cases, investors are more cautious and flocking back to the US Dollar’s relative safe-haven.
However, America’s economy is also struggling with the latest retail sales figures falling well below forecasts in February.
Sam Bullard, a senior economist at Wells Fargo Securities was optimistic about the short-term effects of President Joe Biden’s stimulus package of $1.9 trillion, commenting:
‘With many households set to get another round of direct checks that are more than double what they received in January, we expect spending to receive another jolt in just a few months’ time.’
‘After that, the record amount of ‘excess’ savings should provide ample support to fund consumption as the public health situation improves and restrictions on activities are eased.’
Instead, US Dollar investors aware awaiting today’s latest policy report from the Federal Reserve. The Bank is largely expected to hold interest rates.
Any dovishness about the outlook for the American economy – the largest in the world – could further bolster demand for the safe-haven US Dollar.
As a result, we could see the USD/GBP and USD/EUR exchange rate edge higher this week as risk sentiment would sour on any bad news facing the US economy.