Bank of England’s Improved Forecasts Fail to Shore up Pound US Dollar Exchange Rate
The Bank of England’s (BoE) decision to raise its growth forecasts failed to offer the Pound to US Dollar (GBP/USD) exchange rate any rallying point.
While the central bank now expects to see the UK economy return to its pre-Covid-19 growth levels in the fourth quarter of 2021 this was not enough to bolster the appeal of Pound Sterling (GBP).
Even though the BoE expressed greater confidence in the economic outlook it still appears committed to keeping interest rates lower for longer, to the detriment of GBP exchange rates.
The impact of the forecasts was also limited thanks to the fact that the economy has still lost a significant amount of growth momentum over the course of the pandemic, with the potential for further disruption remaining.
Lower Initial Jobless Claims Figure Benefits US Dollar
Demand for the US Dollar (USD) strengthened on the back of a smaller-than-expected initial jobless claims figure, meanwhile.
Although forecasts had pointed towards new jobless claims showing a slowdown on the week the dip from 590,000 to 498,000 gave investors fresh incentive to pile into the US Dollar.
This decline offered additional evidence of a recovering labour market, encouraging hopes that the US economy has returned to the right track in the second quarter.
With markets increasingly confident in the prospect of a stronger non-farm payrolls report to come USD exchange rates held onto a positive footing.
US Dollar Exchange Rates Look for Additional Support on Non-Farm Payrolls Rise
The release of April’s non-farm payrolls report could offer a fresh boost to the US Dollar on Friday, with investors looking for another sharp increase in employment.
With the headline figure expected to rise to 978,000 worries over the health of the US labour market look set to recede further.
A dip in the accompanying unemployment rate could give USD exchange rates an additional leg up across the board, as the impact of the pandemic continues to fade.
However, if the increase in payrolls falls short of forecast this could put something of a dampener on the US Dollar heading into the weekend, offering the GBP/USD exchange rate a potential boost.
Rising UK Construction PMI to Encourage Pound Recovery
The Pound could find support tomorrow, on the other hand, as long as April’s UK construction PMI rises as anticipated.
Although the construction sector only accounts for a small fraction of the UK gross domestic product an uptick here may still offer GBP exchange rates a rallying point.
With the PMI looking set to rise from 61.7 to 62.3 the odds of a stronger second quarter growth rate are likely to improve, lifting the Pound against its rivals in the process.
Unless the index shows a deterioration on the month the Pound to US Dollar exchange rate could gain some renewed traction on Friday.