The Pound US Dollar (GBP/USD) exchange rate is trading in a wide range during today’s session following news that the Bank of England’s chief economist is leaving the bank in June.
At the time of writing the GBP/USD pairing are trading at around $1.3772 as the US Dollar deals with a risk-on mood.
Pound (GBP) Recovers After Surprise Bank of England Announcement
The Pound has weakened before recovering against the US Dollar today following the announcement yesterday that Andy Haldane the chief economist of the BoE is set to leave the bank in June.
His exit comes as a surprise as he had been reappointed for a new three-year term as a member of the Monetary Policy Committee last year.
Stuart Cole of Equity Capital believes Haldane’s departure ‘will certainly see a move dovish tone’ from the BoE, commenting on the surprise departure Cole said:
‘You have to wonder how much influence there will be from HMT (HM Treasury) to try and ensure his replacement is of a more dovish ilk. The last thing HMT wants is borrowing costs to rise, given its huge pile of debt which could quickly become unaffordable if servicing costs rise too sharply.’
Pound investors have also become concerned surrounding a new cluster of 44 cases of the South African variant of the coronavirus in the UK as surge testing is ramped up to contain the breakout.
Speaking to UK television yesterday Professor Peter Openshaw said:
‘If we get rapid spread of the South African or other more resistant variants, it may well be that we are going to have to put the reductions of lockdown into reverse.’
US Dollar (USD) Gains Limited by Risk-On Mood
The US Dollar has seen its gains limited against the Pound today as it struggles against a risk-on mood and a pullback in US Treasury yields.
Following unimpressive CPI Inflation data from the US yesterday, the currency saw a sharp downturn in US treasury yields which put added pressure on US Dollar sentiment.
Joe Manimbo, senior market analyst at Western Union Business Solutions commented on the inflation data:
‘“It keeps unchanged the outlook of the Fed to stay the low rate course over the foreseeable future. We’re likely to see inflation move higher, before it eventually moves lower. So far the economy is sticking to the Fed’s script.’
This afternoon will see key speeches from the policymakers of the Federal Reserve including Fed Chair Jerome Powell which could give an indication into whether the Fed keep a dovish tone as the US recovers from the coronavirus pandemic.
Pound US Dollar Exchange Rate Outlook: US Retail Sales in Focus
For US Dollar traders retail sales data for March are forecast to have increased 4.5% which could add further support to the currency.
Also from the US, tomorrow will see the release of the weekly jobless claims data from the US which is forecast to come in at 715k, another weekly decrease which could push the US Dollar higher.
In absence of any notable data Pound investors will continue to focus on any coronavirus developments in the UK.
If the UK is unable to contain the cluster of South African variant cases of coronavirus the Pound could suffer.