Pound US Dollar (GBP/USD) Exchange Rate Extends Upside
(Updated 16:35, 27/3/23) The Pound US Dollar (GBP/USD) exchange rate has continued to climb today, as the pairing enjoys an upbeat market mood and positive UK economic data.
As the session has unfolded, the Pound (GBP) has managed to build on earlier success against the US Dollar (USD). The ongoing risk-on market mood is supporting Sterling over the safer ‘Greenback’, while ‘encouraging’ signs of ‘resilience’ and ‘optimism’ among UK retailers have boosted GBP.
That said, USD may have found its losses limited by an uptick in US Treasury bond yields. Yields are often an indicator of central bank interest rate rise bets, and the rise in US yields may be due to increased Federal Reserve expectations following the stabilisation of global financial markets.
Investors now look ahead to a speech from Bank of England (BoE) Governor Andrew Bailey this evening. Could hawkish signals see Sterling climb higher?
At the time of writing, GBP/USD is trading at around $1.2271, having hit an earlier high point of $1.2293.
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Pound US Dollar (GBP/USD) Exchange Rate Firms amid Risk-Positive Tone
The Pound US Dollar (GBP/USD) exchange rate strengthened this morning as markets rallied, lifting the riskier Pound (GBP) against its safer rival the US Dollar (USD).
At the time of writing, GBP/USD is trading at $1.2266, up 0.3% on the day.
Pound (GBP) Rises amid Cheery Trade
The Pound gained ground as today’s European trading session began, with a return of optimism in European markets giving the UK currency a boost.
Following last week’s selloff in European banking shares, investors are far more upbeat today. Shares in Deutsche Bank – Germany’s largest lender – are up 4.65%, regaining some of the losses suffered through Thursday and Friday.
It seems that the selloff was a slight overreaction in markets. Many economists have signalled a vote of confidence in Deutsche Bank, helping to restore stability in the banking sector.
A vote of confidence in @DeutscheBank pic.twitter.com/NwtdAWXdLZ
— Luke Baker (@BakerLuke) March 27, 2023
This renewed optimism is helping to lift the moderately risk-sensitive Pound.
Furthermore, the latest retail sales data from the Confederation of British Industry (CBI) showed an unexpectedly positive result.
Economists had expected the distributive trades survey to drop from 2 to -6. Instead, it eased to 1.
Martin Sartorius, Principal Economist at the CBI, commented:
‘It’s encouraging that activity in the retail sector showed signs of stabilising after a challenging winter. This resilience has helped inspire some spring shoots of optimism, with firms expecting an increase in sales for the first time since last September.’
This positive news added to the generally cheery tone in European markets, providing the Pound with further support.
US Dollar (USD) Softens as Risk Appetite Returns
Meanwhile, the upbeat market mood is dampening the appeal of the safe-haven US Dollar.
In addition to the rally in the European banking sector, investors are cheery about the US market.
News that First Citizens Bank is buying the failed Silicon Valley Bank – the US lender whose collapse sparked the recent turmoil – has contributed to the return of risk appetite. The deal is easing investors’ fears of ongoing contagion risks.
GBP/USD Exchange Rate Forecast: BoE’s Bailey to Boost the Pound?
Looking ahead, a speech from Bank of England (BoE) Governor Andrew Bailey this evening could prompt more movement in the Pound.
Bailey signalled that the bank may not be done raising interest rates following last week’s 25bps hike, offering Sterling some support. If he reiterates this today, or sounds upbeat about the UK’s economic prospects, it could give GBP a lift.
Later on, Federal Reserve policymaker Philip Jefferson is also due to speak. Any hawkish comments from the Fed rate setter could similarly lend an upside to USD.
Until then, risk appetite is likely to continue driving GBP/USD. If markets remain optimistic, the Pound could extend its gains over the US Dollar.