Pound US Dollar Exchange Rate Maintains Flat Trajectory as UK Government Confident in Energy Supply

Pound US Dollar Exchange Rate Steady on as Government Seeks to Ease Energy Concerns

(Updated 14:05 7/10/21) The Pound US Dollar exchange rate remains rangebound this afternoon, as the UK government seeks to reassure the public that the UK’s energy supplies will meet demand this winter.

Energy and business minister, Kwasi Kwarteng said that whilst more suppliers may leave the market, the UK will not face any power shortages this winter, concerns over which have acted as a headwind for the Pound in recent weeks.

Meanwhile, the US Dollar has found some support this afternoon, following the release of last week’s initial jobless claims, after they reported a larger-than-expected fall in new claims at the end of September.

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Pound US Dollar Exchange Rate Flat on US Debt Ceiling Optimism

The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range so far this morning, as a upbeat market mood, offsets UK economic concerns.

At the time of writing the GBP/USD exchange rate is trading at around $1.3575, virtually unchanged from this morning’s opening levels.

US Dollar (USD) Subdued on US Debt Hopes

The US Dollar (USD) is struggling to find support this morning as a prevailing risk-on mood saps demand for the safe-haven currency.

This improvement in market sentiment appears primarily driven by hopes that a compromise will be reached regarding the US debt ceiling following a US Senate vote later today.

US Treasury Secretary, Janet Yellen recently warned that the US is set to reach its debt ceiling by 18 October if lawmakers are unable to agree to an extension.

This has stoked fears over the potential ramifications for the global economy should the US default on its national debt, which given the brinkmanship between the Republicans and Democrats is a real possibility.

Analysts at Danske Bank, suggest that a temporary solution is likely to be found between the two parties:

‘Republicans and Democrats in Congress opened the door to a temporary solution to the debt ceiling issue, saying they would consider a stop-gap measure extending the borrowing limit until December.

‘A Senate vote might follow today. While the deal merely postpones the default risk until the year-end, it at least removes another downside risk to market sentiment in the near-term.’

Pound (GBP) Muted amid Fresh Brexit Tensions

At the same time, the Pound (GBP) is facing some modest headwinds this morning as Brexit tensions between the UK and France threaten to exacerbate the UK’s energy price crisis.

This comes as France has threatened to cut its energy supply to the UK amidst a row over fishing rights.

This comes at a time when energy prices in the UK are already soaring, with GBP investors fearing the impact this could have on the country’s economic recovery, with households and businesses facing increased costs.

These concerns have depressed Sterling sentiment this morning and leaves the Pound US Dollar exchange rate vulnerable to additional pressure today.

Pound US Dollar Exchange Rate Forecast: US Payrolls in the Spotlight

Looking ahead, to the end of this week’s session, it seems safe to assume that the latest US non-farm payroll print will act as the main catalyst of movement in the Pound US Dollar (GBP/USD) exchange rate.

Economists are forecasting the US economy will have added 500,000 jobs last month, up from a lacklustre 235,000 in August, potentially buoying the US Dollar.

However the ‘Greenback’ is vulnerable to some selling pressure if September’s payrolls disappoint again, as this could raise some doubts over whether or not the Federal Reserve will push ahead with a tapering announcement at its next meeting.

Meanwhile, in the absence of any notable UK economic releases, the focus for GBP investors may remain on domestic headlines, with concerns that households could face a difficult winter likely to limit Sterling’s upside potential.