Pound US Dollar Exchange Rate Falls Following Dovish Federal Reserve Statement
The Pound US Dollar (GBP/USD) exchange rate fell by -0.3% today following a rise in demand for safe-haven currencies as Covid-19 infections continue to rise throughout the European Union (EU). The pairing is currently fluctuating around $1.39.
As a result of rising coronavirus infections throughout the EU, demand for the safe-haven currencies like the US Dollar has risen.
Last night’s dovish Federal Reserve has also dampened global risk sentiment. Federal Reserve Chairman Jerome Powell reiterated his belief that the Bank was a long way from hiking interest rates.
In more positive news, however, the Federal Reserve said that the US economy would recover faster than previously expected.
Mr Powell commented:
‘The recovery has progressed more quickly than generally expected. While we welcome these positive developments, no one should be complacent.’
In US economic data, today saw the release of the latest Initial Jobless Claims report for March, which rose to a worse-than-expected 770,000.
Scott Murray, an economist at Nationwide, commented:
‘Still, elevated joblessness shows that the labour market has many scars, and it could take years to heal fully.’
As a result, the US Dollar Pound exchange rate edged higher, with concerns for the US economy weakening demand for riskier assets as the outlook for the global economy begins to falter.
Pound (GBP) Struggles Despite Upbeat Bank of England Minutes
The Pound (GBP) performed relatively well against other currencies today. The Bank of England’s (BoE) upbeat monetary policy minutes has fuelled optimism about the UK’s economy in the months ahead.
The minutes said:
‘Since the MPC’s previous meeting, the news on near-term economic activity had been positive, although the extent to which that news changed the medium-term outlook was less clear.
‘Different MPC members placed different weights on the balance of risks around the outlook.’
However, this was not enough to buoy the Pound US Dollar exchange rate, with some investors remaining cautious after it was revealed that vaccines for under-50-year-olds had been delayed due to supply issues.
As a result, GBP investors are more concerned for the UK economy, which would suffer from rising numbers of coronavirus cases because of vaccine shortage.
Pound US Dollar Exchange Rate Outlook: Could Rising UK Consumer Moral Boost the Pound?
Pound (GBP) traders will be awaiting tomorrow’s release of March’s UK GfK Consumer Confidence report.
Any improvement in consumer morale would boost the Pound to US Dollar exchange rate.
The US Dollar (USD) will remain sensitive to global risk sentiment for the rest of this week.
As a result, we could see demand for the safe-haven currency increase if Europe continues to suffer from rising cases of Covid-19.
The Pound US Dollar (GBP/USD) could claw back some of its losses this week, however, if the outlook for the UK economy continues to improve.