Pound US Dollar (GBP/USD) Exchange Rate Recovers From Two-Week Low on ‘Relief Rally’

April 22, 2020 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Recovers From Two-Week Low on ‘Relief Rally’

Pound Sterling US Dollar (GBP/USD) Exchange Rate Recovers From Two-Week Low

The Pound US Dollar (GBP/USD) exchange rate edged higher on Wednesday afternoon. This left the pairing trading at around $1.2328.

The Pound was able to recover against the US Dollar this afternoon as traders began to flock back towards the currency which had fallen to a two-week low just the day before.

While GBP was still above lows hit in March, analysts argue it is still a risky bet, as Jeremy Stretch, head of G10 FX strategy at CIBS Capital Markets noted:

‘I think it’s more of a little bit of a relief rally. I think Sterling will drift back lower as the data proves troublesome through the rest of the week, and also markets continue to focus on the return of politics and political risk into the UK.’

Meanwhile, Brexit is likely to work its way back into headlines as the June deadline for extending the country’s 11-month transition period nears.

Kit Juckes, head of FX strategy at Societe Generale noted:

‘Foreign exchange does this, we leap from one monstrous issue to another. March was about fighting the immediate fires [...] May will be back to fund managers making asset allocation decisions.’

Earlier: US Dollar (USD) Supported By Safe-Haven Demand

The US Dollar suffered some losses against the Pound this afternoon after making gains earlier this morning.

This morning saw the Dollar remain strong after oil prices were able to recover form another slump, which kept demand for the safe-haven currency strong.

Overnight, oil prices slumped once again, taking Brent crude to its lowest level since 1999 as demand was battered by the coronavirus pandemic.

While the US crude oil prices lifted out of negative territory, it remained around 80% lower than January’s peak, at around $11 a barrel.

In a note to clients, Commerzbank senior FX analyst Thu Lan Nguyen wrote:

‘The recent distortions on the oil market are less likely to be the cause but instead the trigger for the market to reveal its worst fears regarding the economic extent of the corona crisis.’

Pound US Dollar Outlook: US Jobless Claims in Focus

Looking ahead, the Pound (GBP) could slump against the US Dollar (USD) following the release of the Business Optimism Index on Thursday.

If business optimism slumps further than expected in the second quarter of 2020, Sterling will suffer some losses.

Meanwhile, traders will be looking to Thursday’s US initial and continuing jobless claims to see if the United States continues to report high levels of Americans out of work.

If US jobless claims rise higher than forecast, risk sentiment will slump further and traders will flock back to the safety of the ‘Greenback’. This will send the Pound US Dollar (GBP/USD) exchange rate lower.

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TAGS: Pound Dollar Forecasts