Pound US Dollar Exchange Rate Weakens as Global Coronavirus Cases Surge

The Pound US Dollar (GBP/USD) exchange rate has weakened despite UK inflation rising, as fresh concerns over the coronavirus pandemic limit Sterling this morning.

At the time of writing, the GBP/USD exchange rate is trading at around $1.3920 as investors head to the safe-haven US Dollar.

Pound (GBP) Weakens Despite Positive UK Inflation Data

The Pound (GBP) has weakened against the US Dollar this morning despite a rise in UK inflation for March.

The reading slightly missed forecasts of 0.8%, edging up instead to 0.7%. As reported by the Office for National Statistics (ONS), Deputy National Statistician for economic statistics Jonathan Athow said:

‘The rate of inflation increased with petrol prices rising and clothes recovering from the falls seen in February. However, food prices fell back on the year, as prices of some staples were lower than at the start of the pandemic.’

Chief UK Economist at Capital Economics, Paul Dales predicts that inflation will continue to rise as the UK’s economy reopens:

‘The rebound in CPI inflation from 0.4% in February to 0.7% in March is the start of a rise that we think will take inflation to around 1.5% in the next few months and above 2.0% by December.

But as we doubt inflation will stick above 2.0% until late in 2023, the Bank of England is unlikely to hike interest rates for a few years yet.’

Limiting the Pound today, however, are the fresh concerns over the coronavirus pandemic, as India is added to the UK’s travel ‘red-list’ from Friday as the country deals with a surge in cases.

India recorded 295,041 new cases of Covid-19 and 2,023 deaths in the 24 hours up to this morning, as fears rise that the mutated Indian variant of the virus could become dominant in the UK.

US Dollar (USD) Supported by Safe-Haven Demand as New Wave of Coronavirus Threatens

The US Dollar is being supported against many of its biggest rivals as another wave of coronavirus runs rampant across the globe, most notably India and Japan.

More people were diagnosed with Covid-19 in the last week than any other week since the start of the pandemic, topping over 5 million globally just days after the world surpassed 3 million deaths from Covid-19.

The surge in global cases has pushed investors towards the safe-haven US Dollar this morning.

However, limiting the US Dollar’s gains today are the recent dovish comments from the Federal Reserve (Fed) which have all but confirmed that the Fed will keep interest rates low for a longer period than first expected.

Pound US Dollar Exchange Rate Outlook: US Jobless Data in Focus

For US Dollar investors, tomorrow’s US jobless data for the week ending 17th April could cause the ‘Greenback’ to weaken.

As forecasts expect an increase in initial jobless claims on the previous week, with the general consensus coming in at 617k.

Pound traders will be focusing on various data releasing on Friday which includes the latest UK consumer confidence index and retail sales figures for March.

Retail sales are forecast to have risen 4% year-on-year, as the UK economy began to reopen at the end of March.

Both the UK and US will also see the release of flash PMI data on Friday which could give an indication into how the economies are performing respectively, with both expecting a solid growth.

Georgina Clissold

Contact Georgina Clissold