Pound Firms on Upbeat UK Coronavirus Statistics, US Dollar Undermined by Lacklustre GDP

GBP/EUR Exchange Rate: Pound Fluctuates ahead of BoE Rate Decision 

The Pound Euro (GBP/EUR) exchange rate traded in a wide range over the past week, amidst speculation ahead of the Bank of England’s (BoE) latest interest rate decision. 

No policy decisions are expected from the BoE this month, but analysts are split on what sort of tone the bank will strike in its forward guidance, and whether there will be any tapering hints. 

This volatility has also been stoked by the UK’s latest PMI releases, which saw July’s manufacturing index print in line with initial estimates, while activity in the vital services sector was revised higher. 

There can be no doubt that the BoE’s policy outlook will be the main catalyst of movement in the Pound this week. But the question is whether a dovish outlook will send GBP exchanges lower, or will a hawkish tilt from the bank buoy Sterling sentiment? 

GBP/USD Exchange Rate: Sterling Holds Steady on Coronavirus Optimism 

Despite some ups and downs, the GBP/USD exchange rate has been broadly confined within a narrow range over the past week. 

This comes as the Pound has been underpinned by some positive coronavirus statistics in the UK, which point to a sustained fall in new infections, and prompted suggestions that the pandemic could be largely over in the UK by October. 

Also helping to limit the downside in the GBP/USD exchange rate has been fresh Brexit optimism, following the EU’s decision to suspend legal action against the UK for its breaches of the Northern Ireland protocol. 

Outside of the BoE’s impending rate decision, it’s likely the focus for GBP investors will remain on domestic coronavirus developments, with a further fall in new cases likely to lend additional support to the Pound. 

USD/GBP Exchange Rate: US Dollar Dented by Underwhelming USD GDP 

The USD/GBP exchange rate faced some headwinds in the second half of last week’s session, as the latest US GDP estimate printed below expectations, scuppering hopes for a bumper expansion of growth in the second quarter.  

However, the US Dollar then began to claw back a good portion of these losses as a souring market mood revived demand for the safe-haven currency. 

These gains proved short-lived however in the wake of a disappointing ISM manufacturing PMI and a rebound in market sentiment at the start of this week. 

Looking ahead, the focus for USD investors will undoubtedly be on the latest non-farm payroll figures. Will another solid rise in employment help to bolster the appeal of the US Dollar at the end of this week? 

EUR/USD Exchange Rate: Euro Buoyed by Robust GDP Figures 

The Euro closed last week’s session on a positive note, following the publication of the Eurozone’s own GDP figures, which reported a larger-than-expected expansion of growth in the second quarter. 

While this failed to translate into any meaningful gains in the EUR/USD exchange rate, as a result of a stronger US Dollar, it left the single currency well positioned to mount a comeback at the start of this week’s session, in response to July’s finalised Manufacturing PMI, which printed above expectations. 

However, the Euro has subsequently relinquished these gains in the wake of the Eurozone’s services PMI, which was revised lower. 

Germany’s latest industrial releases will doubt be the primary focus for EUR investors going forward, with a rebound in factory orders and industrial production at the end of the second quarter likely to reflect well on the Euro.