GBP/USD Exchange Rate Capped as Health Experts Urge Caution
(Updated 13:30, 5/7/21) The Pound to US Dollar (GBP/USD) exchange rate is trading at around $1.343 this afternoon, slightly down from today’s best levels.
This modest pullback in the GBP/USD pairing comes as UK scientists are urging caution from the government, ahead of Boris Johnson’s announcement regarding the lifting of coronavirus restrictions.
Many experts are worried that the UK government is too eager to end lockdown and there is a risk of cases surging again.
Meanwhile, some of the selling pressure against the US Dollar appears to have lifted this afternoon, further limiting the upside in the GBP/USD exchange rate.
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GBP/USD Exchange Rate Rallies on UK Reopening Optimism
The Pound to US Dollar (GBP/USD) exchange rate is on the rise this morning, amidst expectations that Boris Johnson will confirm England’s 19 July reopening will go ahead as planned.
At the time of writing the GBP/USD exchange rate is trading at around $1.3846, up roughly 0.6% from this morning’s opening rate.
Pound (GBP) Buoyed as PM to Set Out Reopening Plans
The Pound (GBP) is accelerating against the US Dollar (USD) at the start of this week as Boris Johnson is set to outline plans for England’s 19 July reopening later today.
Reports suggest that the PM will confirm that the majority of the remaining legal coronavirus restrictions in England will be lifted from 19 July.
This includes the need to weak masks and social distancing rules, and allowing the final parts of the hospitality industry to reopen.
GBP investors are hopeful the final unlocking of the economy will allow the UK economic recovery to accelerate sharply over the summer, in spite of warnings from health experts that lifting restrictions too soon could result in the UK becoming a ‘variant factory’.
Also lending support to Sterling this morning is the publication of the UK’s latest PMI figures.
June’s finalised services PMI beat expectations, with the index printing at 62.4 versus the 61.7 predicted in last month’s preliminary estimate.
Tim Moore, Economics Director at IHS Markit, commented on the release:
‘The service sector recovery remained in full swing during June as looser pandemic restrictions released pent up demand for business and consumer services. Sales growth eased slightly from May’s recent peak, but capacity constraints and staff shortages meant that many service providers struggled to keep up with new orders.’
US Dollar (USD) Slides US Markets Closed for 4 July Weekend
At the same time, the US Dollar is struggling to attract support this morning, with the currency extending its post-payroll losses.
This comes as US markets are closed for the extended 4 July weekend creating thin trading conditions in USD exchange rates.
However, the US Dollar may quickly rebound when US traders return on Tuesday, with a positive ISM non-manufacturing PMI and ongoing concerns over the global rise in coronavirus cases likely to bolster the appeal of the ‘Greenback’.
Pound US Dollar Forecast: FOMC Minutes in the Spotlight
Looking ahead to later in the week, the main catalyst of movement in the Pound to US Dollar (GBP/USD) exchange rate is likely to be the publication of the minutes from the Federal Open Market Committee’s (FOMC) June policy meeting.
This could bolster USD demand if the minutes reiterate the hawkish shift made by the Federal Reserve in its latest policy statement.
Meanwhile, ongoing Brexit tensions between the UK and EU could infuse fresh volatility into Sterling as the two sides remain at odds over the Northen Ireland protocol.