(Updated 16:50 21/12/21)
The Pound US Dollar (GBP/USD) exchange rate continued to climb before trading within a narrow range toward the end of the day’s session.
At time of writing the GBP/USD exchange rate is at around $1.3250, which is up roughly 0.4% from this morning’s figures.
Pound US Dollar (GBP/USD) Exchange Rate Climbs as Omicron Weighs on Currency Pair
The Pound US Dollar (GBP/USD) exchange rate has risen today amid a risk-on trading attitude and a weakened US Dollar. The currency pairs gains have been limited however by ongoing uncertainty regarding the impact of the Omicron variant.
At time of writing the GBP/USD exchange rate is at around $1.3253, which is up roughly 0.3% from this morning’s figures.
Pound (GBP) Rises As UK Holds Off on Announcing Further Restrictions
The Pound (GBP) has risen against its rivals today amid a risk-on trading environment. The currency’s upward movement has been limited however, as concerns over the impact of the Omicron variant continue to place pressure on the currency.
Fresh rumours of new restrictions for the UK came after an emergency cabinet meeting was called on Monday afternoon, although Prime Minister Boris Johnson is thought to be holding off on an announcement until after Christmas.
The news comes amid further calls from the country’s struggling hospitality and retail sectors for Chancellor Rishi Sunak to provide further financial support, with some major retailers already having to offload Christmas trees for £1 amid falling demand.
These calls for support may had a knock-on effect on Sterling following this morning’s news that UK government borrowing surged to £17.4bn in November, well above forecasts of £16bn.
The arrival of the Omicron variant is likely to increase the need for further public borrowing in the coming weeks which could see the Pound fall further.
US Dollar (USD) Dips as Trillion Dollar Infrastructure Bill Stalls
The US Dollar (USD) has dipped against its rivals today as the safe-haven ‘Greenback’ struggled to regain investor confidence. This comes after news on Monday that President Joe Biden’s $1.75 trillion ‘Build Back Better’ bill may not make it through the US Congress.
The news came after a Democrat Senator crucial to the vote withdrew his support on Sunday. Senator Joe Manchin refused to back the legislation as he felt that the debt load it might create would ‘drastically hinder’ the country’s ability to respond to geopolitical threats.
In the face of Senator Manchin’s surprise statement, Goldman Sachs lowered its GDP growth forecast for 2022 which is likely to have further hampered the US Dollar’s chances for upward movement.
Goldman Sachs analyst Jan Hatzius showed concern that the news may already impact a gloomy long-term economic outlook for the country:
‘We had already expected a negative fiscal impulse for 2022 as a result of the fading support from COVID-relief legislation enacted in 2020 and 2021, and without BBB enactment, this fiscal impulse will become somewhat more negative than we had expected.’
GBP/USD Exchange Rate Forecast: Will GDP Growth Slow for Pound and Dollar?
Looking to the week ahead, Sterling could see a dip today as distribute trades figures are expected to show a significant fall in the health of the country’s retail sector as the Omicron variant continues to bite. The final reading of GDP growth for the third quarter on Wednesday is also forecast to show fall after the Bank of England (BoE) slashed growth forecasts for December and 2022 followings its meeting last week.
The US will also see final readings of GDP growth for the third quarter on Wednesday which are forecast to fall, potentially placing more pressure on USD. Thursday will is currently expected to see a fall in personal income and spending which could well push the US Dollar down if figures print as forecast. A predicted rise in durable goods orders and consumer sentiment for December could provide a welcome boost to the currency however.