Pound US Dollar Exchange Rate Firms as UK Meets Booster Target

Pound US Dollar (GBP/USD) Exchange Rate near Highest Levels Since November

The Pound US Dollar (GBP/USD) exchange rate is hovering above $1.35 today, its highest level since the start of November.

Amid thin trading conditions, the Pound is receiving support from cautious optimism that the impact on UK economic activity of soaring coronavirus cases will not be severe.

Pound (GBP) Strengthens on Cautious Optimism

The Pound (GBP) is ending 2021 on strong footing today on cautious optimism that the UK will avoid significant damage to economic activity from soaring Covid-19 infection rates.

Although UK coronavirus cases hit another record high of 189,000 cases on Thursday and hospitalisations and deaths rose, news that the UK met its booster vaccination target provided optimism.

All eligible adults in the UK have had the opportunity to receive a Covid-19 booster vaccination in an attempt to keep severe cases of Covid-19 to a minimum and to prevent tighter UK coronavirus measures.

Government figures show more than 28.1 million people in England have had their booster, which is 7 in 10 adults.

Health Secretary Sajid Javid said:

“Our world-leading vaccination programme has meant tens of millions of people have been able to see their loved ones this Christmas knowing they have the protection of the booster.

“I am delighted to confirm we have hit our target of offering a COVID-19 booster to all adults by the New Year.”

News of the government reaching its vaccination target follows claims by Prime Minister Boris Johnson that the ‘overwhelming majority’ of patients in intensive care units have not been vaccinated.

With the UK government yet to introduce restrictions, the Pound is firming on optimism that remaining open will limit the impact on UK fourth quarter growth going into 2022.

However, the sheer number of coronavirus cases threatens to cause rising hospitalisations which could in turn lead to tighter restrictions.

US Dollar (USD) Pressured by Improved Market Mood

The US Dollar (USD) is closing the year under some pressure in thin New Year trade as improved market sentiment has limited safe-haven demand for USD.

Reports that data in South Africa suggests the peak of the Omicron-driven fourth wave of coronavirus has passed has lifted the market mood due to signs of lower hospitalisations.

The South African government said:

“While the Omicron variant is highly transmissible, there has been lower rates of hospitalisation than in previous waves.”

US initial jobless claims data released on Thursday also fuelled the upbeat mood after it revealed a surprise drop to 198,000 in the week up to 25th December, down from 206,000 the previous week.

Pound US Dollar Forecast: GBP/USD to Extend Gains?

The Pound US Dollar exchange rate may extend its gains going into 2022 if increased market risk appetite continues on reports that the Omicron variant shows signs of milder symptoms.

The UK government’s decision on whether to introduce restrictions when the cabinet reassess data will also drive significant movement in GBP/USD.

With cases rates continuing to soar in the UK, the government may come under increasing pressure to act.

Meanwhile, the influential US ISM manufacturing PMI for December released early next week will likely stoke volatility in USD exchange rates.

Forecasts point to activity in the sector slowing slightly, although a reading of 60.2 would still represent solid growth.

US JOLTs job openings data released on Tuesday could also drive movement in the US Dollar, the number of vacancies expected to decline slightly, but remain high at 10.8 million.

Andrew Roberts

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