Pound (GBP) Edges Higher as Jitters Ahead of November Election Weigh on US Dollar
The Pound to US Dollar (GBP/USD) exchange rate edged higher today, with the pairing currently fluctuating around $1.26.
The US Dollar (USD) fell today as risk-on trade has weakened the appeal of the safe-haven currency. This follows reports that China’s economy is rebounding despite the Covid-19 pandemic.
As a result, investors have sought out riskier assets as the world’s second largest economy – China – continues to improve, while America appears to be lagging.
Goldman Sach’s Zach Pandi commented on the ‘Greenback’s performance:
‘The only thing holding us back really from enthusiasm around the currency is tensions with the United States ahead of the November election.’
Meanwhile, yesterday’s release of the latest US CPI data, while edging higher by 0.6%, was not enough to boost confidence in the US economy.
Chris Rupkey, chief economist at MUFG in New York, said:
‘The economic downturn is going to last longer with the second wave of the coronavirus pandemic spreading across the nation and this extended period of weak growth and soft demand will keep the inflation genie locked in her bottle for longer as well.’
In US economic news, today will see the release of the latest US industrial production figure for June, which is expected to rise from 1.4% to 4.4%. As a result, we could see optimism grow for the America’s economic recovery.
Pound (GBP) Rises as UK Inflation Data Beats Forecasts for June
The Pound (GBP) rose today following the release of the latest UK Consumer Price Index for June, which beat forecasts and rose from 0.5% to 0.6%. As a result, investors have become more optimistic about Britain’s economic recovery.
Samuel Tombs of Pantheon Economics was more downbeat, saying:
‘The small rise in CPI inflation in June is nothing to worry about. It was driven by the volatile computer games component. We still expect the headline rate to fall a bit further in Q3. The data won’t stand in the way of the [Monetary Policy Committee] doing more to stimulate the economy later this year.’
Today also saw the Bank of England’s (BoE) policymaker Silvana Tenreyro declare that she was prepared to push for fresh stimulus measures to aid the UK’s struggling economy. She also added that a ‘V-shaped’ economic recovery was unlikely.
Mrs Tenreyro said:
‘Assuming prevalence gradually falls, my central case forecast is for GDP to follow an interrupted or incomplete ‘V-shaped’ trajectory, with the first quarterly step-up in Q3. We are already seeing indications of a sharp recovery in purchases that were restricted only because of mandated business closures.’
GBP/USD Outlook: Could Rising British Unemployment Push Sterling Downward?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK ILO Unemployment Rate for May. If employment continues to grow, we could see Sterling shed some of its gains.
Meanwhile, USD traders will be awaiting tomorrow’s release of the latest US retail sales figures or June. Any signs of these falling would prove USD-negative.
The US Dollar (USD) will continue to be driven by risk-sentiment this week. If fears begin to grow over a possible second wave of Covid-19, then we could see the safe-haven ‘Greenback’ benefit.
The GBP/USD exchange rate will remain sensitive to speculations over the British economy. Any further signs of stimulus measures from the BoE could buoy Sterling.
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