Pound US Dollar Exchange Rate Steady, US Federal Reserve Strikes Upbeat Tone

GBP/USD Exchange Rate Rangebound Following US Fed Rate Decision

The Pound US Dollar exchange rate is steady today after the US Federal Reserve confirmed expectations and held interest rates and left the pace of asset purchases unchanged. Fed Chair Jerome Powell however hinted at a scaling back of the asset purchase programme in light of the improving outlook for the US economy. The pairing is currently trading around $1.39.

Fed Chair Powell said:

‘We will do what we can to avoid a market reaction, but ultimately when we achieve our macroeconomic goal we will taper, as appropriate.’

Hawkish monetary policy from the Federal Reserve has pushed the US Dollar higher. But Powell’s comment that a start to tapering was still ‘ways off’ has left some USD investors cautious.

Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors, commented about the overall outlook or the US economy, saying:

‘[F]orecasters are more optimistic about growth in 2022 than the US central bank. Elsewhere, the Fed’s forecasts now show a clear bias to above target inflation in the coming years. PCE inflation is forecast to be above target over the next 3 years.’

In other US economic news, today will see the release of the US initial jobless claims report for June.

Any signs of falling levels of unemployment in the US could see the US Dollar Pound exchange rate begin to pick-up.

Pound (GBP) Exchange Rate Steady as UK Covid-19 Cases Continue to Rise

The Pound (GBP) failed to gain against the ‘Greenback’ today as Covid-19 cases in England are doubling every 11-days, according to the latest data.

Experts at Imperial College London said there has now been a ‘rapid switch’ between the Alpha to Delta variant of the coronavirus.

Stephen Riley, a professor of infectious disease dynamics at Imperial, commented:

‘Prevalence is increasing exponentially and it is being driven by younger ages. It appears to be doubling every 11 days.

‘Clearly that is bad news … but the key thing to point out here is that we are in a very different part of the epidemic in the UK and it is very difficult to predict the duration of the exponential phase.’

In absence of any notable UK economic data today, GBP investors are instead awaiting tomorrow’s release of the latest retail sales data for May.

With the UK economy expected to pick-up in the months ahead – despite the delay to easing lockdowns – Pound investors are becoming cautiously more optimistic.

GBP/USD Exchange Rate Forecast: Could Strong UK Retail Sales Data Boost Sterling?

We could see the Pound US Dollar exchange rate head higher tomorrow if the latest UK retail sales gauge shows a marked improvement in May.

Forecasts predict a 1.6% rise month-on-month , while year-on-year sales are expected to rise by 29%.

UK Covid-19 developments will, however, dictate Pound movement. So, any indications of rising case numbers would be GBP-negative.

Risk sentiment will also dictate the US Dollar this week. If US-China trade tensions intensify, then demand for the safe-haven ‘Greenback’ could begin to pick-up.

David Moore

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