October 14, 2020 - Written by John Cameron
STORY LINK Pound to US Dollar Exchange Rate: GBP/USD Shakes off Stronger US Producer Price Index
Improved US Producer Price Index Unable to Dent Pound US Dollar Exchange Rate
A better-than-expected performance from September’s US producer price index data was not enough to keep the Pound to US Dollar (GBP/USD) exchange rate from rallying.
While the data pointed towards a modest uptick in inflationary pressure on both the month and the year the US Dollar remained under a degree of pressure against its rivals.
A fresh bout of global market risk aversion also failed to shore up the safe-haven US Dollar, in spite of news that a Covid-19 vaccine trial had been paused.
Even though the Covid-19 crisis looks set to drag on for longer USD exchange rates struggled to find any traction on Wednesday afternoon.
Demand for the Pound, meanwhile, saw improvement as Boris Johnson indicated his preference for avoiding another national lockdown.
Increasing division among UK politicians over the issue of further Covid-19 restrictions left the GBP/USD exchange rate free to push higher.
USD Exchange Rates Brace for Latest US Jobless Claims Figures
Support for the US Dollar could pick up on Thursday, though, if the latest set of initial and continuing jobless claims figures show improvement on the week.
As long as the unemployment rate appears on track to fall in the coming weeks a sense of optimism could help to rally USD exchange rates.
On the other hand, a fresh increase in the number of new and continuing jobless claims may stoke fresh anxiety over the outlook of the US labour market.
Unless markets see reason to bet that job losses have started to ease, in spite of the ongoing Covid-19 crisis, the US Dollar looks vulnerable to further selling.
Mounting political anxiety ahead of the presidential election also looks set to keep USD exchange rates on the back foot in the days ahead.
Even if Joe Biden extends his lead in the polls a sense of uncertainty over the outcome of the election could limit the potential for US Dollar gains for some time to come.
Unfolding UK Covid-19 Response Set to Drive Pound Sentiment
Developments in the UK’s Covid-19 response could prompt fresh volatility for the GBP/USD exchange rate in the near term, meanwhile.
If the government backs down from introducing tougher measures, such as a proposed two-week ‘circuit-breaker’, this may encourage the Pound to trend higher.
As long as the risk of fresh damage to the UK economy appears minimised this could help to lift the GBP/USD exchange rate.
In the absence of any major UK data releases the Pound looks vulnerable to any particular shifts in market sentiment, though.
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TAGS: Pound Dollar Forecasts