Pound US Dollar Exchange Rate News: GBP/USD Retreats from $1.37 as Biden Faces Pushback on Stimulus

January 25, 2021 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Retreats from $1.37 as Biden Faces Pushback on Stimulus

US Dollar (USD) Supported by US Stimulus Concerns

After initially falling through today’s Asian session, the safe-haven US Dollar (USD) was able to claw back its losses against the Pound (GBP) during the European trading session amidst a souring of market sentiment.

This comes in response to growing concern about Joe Biden’s ability to push his ambitious $1.9 trillion stimulus package through Congress.

Hopes for the stimulus package had underpinned the USD selling bias which dominated last week’s session.

But recent reports suggest that Biden might face an uphill battle in passing the package due to his narrow majority in the Senate, particularly as he faces pushback from Senators on both sides of aisle due to some of the measures included in the stimulus bill, such as a minimum wage increase.

Some Senators have also questioned whether it should be passed so shortly after the previous package.

Speaking to Business Insider last week, Republican Senator, Susan Collins, said:

‘It's hard for me to see when we just passed $900 billion of assistance why we would have a package that big. Maybe a couple of months from now, the needs will be evident and we will need to do something significant, but I'm not seeing it right now.’

Any setbacks for Biden’s stimulus package will no doubt sour market sentiment, and send the US Dollar higher.

Pound (GBP) Flat as Brexit Woes Offset by Boris Johnson’s Lockdown Comments

The Pound (GBP) is mostly rangebound against the US Dollar (USD) this afternoon as the UK currency is undermined by concerns over how much friction is being caused by new Brexit regulations.

Whilst the UK government frequently promised ‘frictionless’ trade with the EU following the signing of a deal at the end of last year, its growing increasingly apparent that UK businesses are struggling with the new paperwork requirements and associated costs.

It appears to be so bad that Officials at the UK’s Department for International Trade have now started to advise UK businesses to move part of their operations to the EU in order to circumvent these regulations.

However, the Pound has been able to avoid any major losses, after Boris Johnson said that the government will look at whether it is possible to relax some coronavirus restrictions in the coming weeks, bolstering hopes that some parts of the UK economy could still re-open sometime in the Spring.

GBP/USD Exchange Rate Forecast: Rise in Unemployment to Drag on Sterling?

Looking ahead to tomorrow’s session, the Pound to US Dollar (GBP/USD) exchange rate is likely to face some headwinds with the publication of the UK’s latest jobs report.

November’s figures are expected to reveal that domestic unemployment rose above 5% for the first time since 2016 as firms struggled in the face of a second national lockdown.

This could see GBP exchange rates weaken, unless the accompanying wage growth figures print particularly positively.

Meanwhile, aside from Biden’s stimulus efforts, the focus for USD investors this week will be on the latest US growth figures.

This could see the safe-haven US Dollar come under pressure later in the session, if the fourth quarter’s preliminary GDP helps to cheer market sentiment by showing a healthy expansion of growth at the end of 2020.

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