Pound US Dollar Exchange Rate Rangebound amid Elevated US Yields
The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range this afternoon, with the pairing having relinquished its initial gains amidst a rise in US Treasury yields.
At the time of writing the GBP/USD exchange rate is trading at around $1.3772, virtually unchanged from this morning’s opening levels.
US Dollar (USD) Bolstered by Rising Bond Yields
The US Dollar (USD) is off to a steady start this week, with the currency being underpinned by rising US Treasury yields.
Yields remain elevated today amidst the expectation that the Federal Reserve will make a tapering announcement following its November policy meeting.
This follows comments by Fed Chair Jerome Powell on Friday, in which he indicated the US central bank is still on track to start winding down some of its pandemic-era asset purchases.
However the upside potential of the US Dollar looks to remain limited in the face of upbeat market sentiment, which is capping demand for safe-haven currencies at the start of this week’s session.
The positive mood comes amid fading concern over the future of Evergrande, with shares in the Chinese property giant rising amidst hopes the firm’s pivot to electric vehicles and restarting of work on several construction projects show that the crisis may be over.
Pound (GBP) Buoyed by Brexit Optimism
At the same time, the Pound (GBP) is attracting some support today on the back of positive Brexit headlines.
These suggest that the UK government may be willing to compromise with the EU on the issue of the Northern Ireland protocol, following ‘constructive’ talks last week.
The protocol, which is designed to prevent a hard border in Ireland, remains a contentious issue between both sides, with UK Brexit Minister David Frost previously calling for the agreement to scrapped.
Talks between the two sides are expected to resume in London on Tuesday and GBP investors will be hoping that more progress towards a solution will remain positive.
Pound US Dollar Exchange Rate Forecast: UK Autumn Budget in Focus
Looking ahead, a key catalyst of movement in the Pound US Dollar (GBP/USD) exchange rate this week is likely to be the publication of the UK government’s Autumn Budget on Wednesday.
Chancellor Rishi Sunak is widely expect to avoid including any additional tax increases in his Budget and will instead focus on limiting spending as he looks to rebuild the UK’s public finances.
GBP investors will also be keeping an eye out for the Office for Budget Responsibility’s (OBR) accompanying economic forecasts, which could boost Sterling sentiment if the OBR is more optimistic in its outlook.
Meanwhile the publication of the latest US durable goods orders release could dent the US Dollar this week, amidst forecasts that September’s figures will report a sharp contraction of order growth.