The Pound US Dollar exchange rate is steady today as easing lockdown restrictions continues in the UK and Health Secretary Matt Hancock expressed a ‘high degree of confidence’ in the effectiveness of Covid-19 vaccines against the Indian variant.
Last Week: Sterling Dented by Indian Variant Fears
The Pound soared at the start of last week following a relief rally on the Scottish National Party’s (SNP) failure to secure an outright majority which eased fears of an imminent independence referendum.
GBP exchange rates received further support from the UK’s better-than-expected GDP figures that indicated 2.1% growth in March.
However, the GBP/USD exchange rate retreated after Prime Minister Boris Johnson warned that the Indian variant could disrupt the Government’s lockdown easing roadmap.
Meanwhile, after struggling at the start of the week, the US Dollar rebounded as US inflation soared to 4.2%, which caused USD investors to doubt the Federal Reserve’s stance that inflationary pressure will be transitory.
The higher-than-expected reading soured market sentiment and pushed US Treasury yields higher as some investors revised expectations that the Fed’s next interest rate hike will be sooner than its forward guidance indicates.
Three Things to Watch Out for This Week
- UK Unemployment Data
Pound traders will monitor this week’s UK unemployment rate report for March. Any indications that joblessness is beginning to ease off – thanks to easing lockdown restrictions – could support GBP exchange rates.
- Federal Open Market Committee Minutes
Although the meeting minutes are likely to reiterate the Fed’s loose monetary policy stance as it took place before last week’s US inflation rate data release, USD exchange rates may come under some pressure.
- UK PMIs
Friday will see the release of the flash UK services PMI for May. If this confirms forecasts and rises to 62 (an eight-year high), the Pound US Dollar exchange rate would head higher as the outlook for the UK economy and second quarter growth improve.
GBP/USD Outlook
The Pound US Dollar exchange rate could head higher this week as UK lockdowns continue to ease. Added to this, positive UK economic data could continue to buoy optimism in the nation’s increasingly positive economic outlook.