Pound US Dollar Exchange Rate Rebounds in Risk-On Trade

Pound US Dollar Exchange Rate Rallies as USD Drops

(Updated 16:50, 9/7/21) The Pound Us Dollar (GBP/USD) exchange rate has rebounded, hitting a high of $1.38665 before easing off slightly.

A sudden turnaround in risk sentiment is driving Sterling’s gains and sapping demand for the safe-haven ‘Greenback’.

The shift in market mood comes as global stocks rally, with investors searching for bargains after yesterday’s sharp sell-off.

Original article continues below:

Pound US Dollar Exchange Rate Remains Rangebound

The Pound US Dollar (GBP/USD) exchange rate has been trading in a narrow range this morning following the UK’s lacklustre GDP figures.

The pair is currently trading around the $1.378 mark, not moving much since yesterday’s session.

Pound (GBP) Muted as GDP Figures Miss the Mark

The Pound (GBP) is muted this morning after a range of data releases came in below forecasts.

Most notable were industrial production and GDP, both of which missed predictions of 1.5% to come in at 0.8%.

The UK’s GDP figure was particularly surprising, as it showed a much larger slowdown of economic growth in May than economists had expected. As more of the UK economy opened up in May, many believed the GDP figure would be quite strong.

Although the UK service sector grew by 0.9%, construction and manufacturing both contracted, with the latter affected by a global shortage in semiconductors.

Despite this being the fourth consecutive month of growth, GDP is still 3.1% below its pre-pandemic level.

While this may weigh on Sterling, GBP remains underpinned by reopening optimism and a generally strong economic recovery, which seems to be limiting the downside.

US Dollar (USD) Softens on Jobless Claims Data

The US Dollar (USD) is also somewhat subdued today, amid lower US Treasury yields and yesterday’s disappointing jobless data.

Yesterday’s unemployment figures showed that initial jobless claims rose by 2,000 to 373,000, rather than dropping to 350,000 as expected. The results indicate that there may still be bumps ahead on the road to economic recovery for the US.

Meanwhile, the risk-averse market mood is cooling somewhat, slightly dampening demand for the safe-haven ‘Greenback’. However, with coronavirus cases still rising globally and signs that many countries’ economic recoveries are slowing down, market sentiment remains mostly cautious.

Pound US Dollar Exchange Rate Forecast: UK Coronavirus and US Inflation in Focus

With no notable data releases coming out for the rest of the day, it’s possible that the Pound US Dollar exchange rate may continue to trade in a narrow range.

Turning to next week, Boris Johnson is expected to give more details on the government’s plan to lift most of the remaining lockdown restrictions on 19 July. However, the PM is under pressure from the scientific community to exercise caution, as UK coronavirus cases surge.

The US inflation figures on Tuesday are also likely to drive some movement in GBP/USD, with inflation forecast to ease slightly from 5% to 4.9%, though this would still mean it was at its highest levels since 2008.

Samuel Birnie

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