July 30, 2020 - Written by John Cameron
STORY LINK Pound to US Dollar (GBP/USD) Exchange Rate Rises as US Growth Falls to Record Lows
GBP/USD Exchange Rate Edges Higher as US Economy Continues to Suffer
The Pound to US Dollar (GBP/USD) exchange rate rose by 0.5% today, with the pairing currently fluctuating around $1.305.
The US Dollar (USD) has continued to struggle following yesterday’s dovish statement from the US Federal Reserve which underlined fears for America’s rising Covid-19 cases and its effect on the US economy.
Fed policymakers said:
‘Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.’
Today also saw these fears confirmed, with the latest US GDP figure for July falling from -5% to -32.9%. However, this was revised up from -34.1%, leaving some ‘Greenback’
investors hopeful that America’s economy could potentially recover in the months ahead.
The US Dollar (USD) suffered from today’s soaring US Continuing Jobless Claims figure for July, which rose above forecasts to 17.018 million. As a result, USD investors have become more concerned that rising unemployment could drag down the world’s largest economy.
Pound (GBP) Rises as Hopes of UK-EU Trade Talk Progress Boosts Appetite for Sterling
The Pound (GBP) edged higher on the US Dollar (USD) today on renewed hopes that Downing Street could be taking more proactive steps in UK-EU post-Brexit trade negotiations.
This follows comments from Phil Hogan, the European Commissioner for Trade, which indicated that Downing Street had only fully engaged on contentious issues ‘in the last week or two’.
However, Hogan hinted at a sense of urgency from Downing Street, saying:
‘I think there is now a realisation by people in the negotiating side of UK that time is running out. The British business has started to be more vocal, privately and publicly, in relation to the importance of reaching a deal.’
Meanwhile, Prime Minister Boris Johnson has urged Britons not to ‘delude’ themselves into thinking that the coronavirus pandemic is over. As a result, GBP investors have remained cautious as the UK continues to face rising cases of the Covid-19 virus.
Mr Johnson said:
‘[T]he most important thing we can do to stop a really damaging scond wave, which would have real, real consequences - not just medical, but for the economy - is everybody continue to observe social distancing guidelines, to wash your hands and to wear a mask on public transport or in shops. And the most important thing we need to do is get the test if you have symptoms.’
GBP/USD Forecast: Could Improving US Consumer Confidence Buoy the ‘Greenback’ on Friday?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the Michigan Consumer Sentiment Index for July. Any improvement in America’s economic outlook could prove USD-positive.
The US Dollar (USD) could also rise if US-China trade tensions escalate. As a result, investors would once again seek out the safe-haven ‘Greenback’ as fears grow over the global economy’s ability to recover from the coronavirus pandemic.
The GBP/USD exchange rate, meanwhile, will continue to be driven by Brexit factors. Consequently, we could see the Pound (GBP) continue to rise if hopes of a UK-EU post-Brexit trade deal grow.
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TAGS: American Dollar Forecasts Pound Dollar Forecasts