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Pound US Dollar (GBP/USD) Exchange Rate Rises as US Economic Outlook Darkens

April 14, 2020 - Written by John Cameron

GBP/USD Exchange Rate Edges Higher as Chinese Trade Data Beats Forecasts


The Pound to US Dollar (GBP/USD) exchange rate rose by 0.6% today, with the pairing currently trading around $1.260.

The US Dollar (USD) fell against the Pound (GBP) following this morning’s report that China’s trade data had beaten forecasts, leaving investors breaking the safe haven ‘Greenback’ and seeking out riskier assets instead.

Today also saw USD struggle after it was announced that Europe’s most heavily hit by the coronavirus – Italy and Spain – were considering opening up their economies as the death toll in each state continues to drop off.

The International Monetary Fund (IMF) also announced that it projects the worst financial crisis since the Great Depression of the 1920s, leaving many investors feeling concerned that the US – which is due to face its peak level of coronavirus-related deaths – concerned about the outlook for the global economy.

The IMF said in its statement:

‘It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the last financial crisis.’

Pound (GBP) Rises as Boris Johnson is Set for Recovery


The Pound (GBP) continued to edge higher against the ‘Greenback’ following this weekend’s announcement that Prime Minister Boris Johnson was set for recovery from the coronavirus following his release from St. Thomas’ hospital.

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Now that the UK’s political and financial infrastructure is expected to stabilise due to the news of the PM’s return to health, the Pound has benefited following over a week’s uncertainty.

Today saw the Office for Budget Responsibility (OBR) paint a bleak picture for the British economy going ahead, forecasting the UK GDP to plummet by -35% while unemployment could skyrocket to 2 million in the second quarter.

The OBR commented:

‘[The Government] should also help to limit any long-term economic 'scarring' - for example, due to cancelled business investment, widespread business failures and the unemployed losing contact with the labour market.'

‘Such scarring would both harm future living standards and increase the structural budget deficit.’

However, with the UK’s bleak economic forecast going forward, and the lockdown set to continue until further notice, the GBP/USD exchange rate could begin to sink in the near-term.

GBP/USD Forecast: Could the UK’s Darkening Economic Outlook Weigh on Sterling?


US Dollar (USD) investors will be looking ahead to tomorrow’s release of the US Retail Sales report for March. Any significant downturn, which is likely in the light of the coronavirus outbreak last month, would prove USD-negative.

The GBP/USD exchange rate will remain sensitive to the UK’s economic developments going forward. Any indications that coronavirus cases could continue to rise would delay Britain’s ability to recover, and as a consequent we could see the Pound shed some of its gains against the US Dollar.

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TAGS: American Dollar Forecasts Dollar Pound Forecasts

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