The Pound US Dollar exchange rate fell today as demand for the safe-haven ‘Greenback’ has risen in light of recent Covid-19 news, with infection rates up by nearly 40% in the UK and rising in other countries. This has put a dent in hopes of a global economic rebound, and has moderately dampened risk sentiment over the past week to the benefit of USD.
What’s Been Happening: US Nonfarm Payrolls Fall Below Expectations
The Pound rose at the beginning of last week thanks to a strong UK manufacturing PMI for May. The figure fell below forecasts but remained strong at 65.6 as the nation’s economy continues to recover from the Covid-19 pandemic.
Rob Dobson, the director at IHS Markit, which compiles the survey, commented on the data:
‘The UK PMI surged to an unprecedented high in May, as record growth of new orders and employment supported one of the steepest increases in production volumes in the near 30-year survey history.’
UK mortgage approvals also beat forecasts in April, while the UK services PMI exceeded consensus and rose to a 24-year high, buoying confidence in the British economy.
Concerns over the Delta Covid-19 variant’s transmissibility and the possibility of a delay to full lockdown restrictions being eased this month however weakened the GBP/USD exchange rate.
The US economy continued to perform strongly, with the latest US employment change data in May showing a significant return to strength in the nation’s labour market.
US nonfarm payrolls fell short of expectations, however, despite 559,000 new jobs being added in May, according to the US Bureau of Labor Statistics. This limited some of the appeal of the ‘Greenback’ as last week drew to a close.
Three Things to Watch Out for This Week
- UK Covid-19 Developments
If the UK’s Covid-19 infection rates continue to rise this week, then Sterling would suffer from fears that the full easing of lockdown restriction of 21 June could face a delay.
- UK Economic Data
This week’s UK data calendar is relatively quiet, but GBP investors will keep a close eye on May’s retail sales figure, and any signs of the UK’s GDP being upwardly revised in April would be Pound-positive.
- US Inflation Data
US Dollar traders will look ahead to this week’s publication of the latest US inflation data for May. Any indications that the nation’s economy is underperforming expectations would be USD-negative.
Pound US Dollar Forecast
The GBP/USD exchange rate could head higher this week, however, if UK Health Secretary Matt Hancock confirms that the full lifting of lockdown restrictions on 21 June will go ahead as planned.