Pound US Dollar Exchange Rate Benefits from Morning’s UK Growth Report
The Pound US Dollar (GBP/USD) exchange rate held its ground this morning, as the Pound (GBP) benefitted from the morning’s UK growth rate report. The US Dollar (USD) was resilient as well however, amid US inflation hopes.
After opening last week at the interbank level of 1.38, GBP/USD briefly jumped to a fortnight best before tumbling. GBP/USD ultimately closed last week at the level of 1.37.
When markets opened this week, GBP/USD briefly slipped into the interbank region of 1.36 and its lowest levels in over a month. However, on Tuesday GBP/USD was attempting recovery. At the time of writing, GBP/USD is trending in the interbank region of 1.37.
Reaction to US inflation data could drive the Pound to US Dollar exchange rate for now, until more key US data including retail sales are published in the coming sessions.
Pound (GBP) Exchange Rates Resilient as UK Economic Activity Beats Market Expectations
Hopes for Britain’s economy to be one of the first major economies to recover from the coronavirus pandemic have been the primary cause of the Pound’s impressive strength over the past month or so.
These hopes were only further boosted when today’s UK economic activity results printed above analyst expectations.
While Britain’s monthly growth rate was a slightly weaker than expected 0.4% in February, the yearly and three month figures both beat forecasts. This indicated that Britain’s economy was weathering its third coronavirus lockdown better than expected.
Optimism about Britain’s recovery outlook continues to be the primary cause of broad Pound strength lately. According to Rory Macqueen, Principal Economist at the National Institute of Economic and Social Research (NIESR):
‘If the vaccine programme and lifting of restrictions continue on schedule this provides a firm basis for continuing growth in the second quarter and 2021 overall.’
US Dollar (USD) Exchange Rates Jittery amid Market Excitement for US Inflation Report
Sterling struggled to climb too much against the US Dollar. Investors were hesitant to sell USD ahead of the day’s anticipated US inflation rate report.
This is because of speculation that signs of stronger inflation could pressure the Federal Reserve to tighten US monetary policy.
Analysts also believed that the possibility of rising inflation was a key focus for markets currently.
Demand for the US Dollar was stronger this afternoon, after the publication of higher than expected US inflation rate data.
Pound US Dollar (GBP/USD) Exchange Rate to be Focused on US Outlook
With this week’s notable UK data already coming in and the Pound’s appeal fairly solid, shifts in the Pound to US Dollar exchange rate will likely be influenced more by US news in the coming sessions.
Wednesday’s session will see the publication of US import and export price data, as well as a number of speeches from Federal Reserve officials. This includes Fed Chairman Jerome Powell.
Any Fed reaction to today’s US inflation rate report could be particularly influential.
Thursday will follow with US retail sales data from March. US production figures from March will also be published.
As for the Pound, UK investors will be awaiting next week’s UK job market data as well as reacting to any domestic coronavirus developments.
Surprising US economic activity, or unexpected developments in the UK or US coronavirus situations, will remain highly influential to the Pound US Dollar (GBP/USD) exchange rate as well.