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GBP to USD Rises Ahead of UK Lockdown Exit Plan Announcement

February 22, 2021 - Written by John Cameron

GBP/USD Exchange Rate Heads Higher on UK Covid Vaccine Optimism

The Pound to US Dollar exchange rate rose by 0.2% today ahead of the unveiling of Prime Minister Boris Johnson’s lockdown exit plan. The pairing is currently trading around $1.40.

Boris Johnson is also expected to highlight new data that shows that Covid-19 vaccines has had a significant effect on transmission.

UK Vaccine Minister Nadhim Zahawi said:

‘Suffice to say the evidence looks good. The Oxford team demonstrated their own evidence of cutting transmission by two-thirds.’

This will offer a far more optimistic view about the reopening of the economy in the months ahead.

However, GBP investors are remaining cautious as easing of lockdowns could rise the infection rate about 1, meaning that the cases virus could exponentially increase.

Today also saw positive news about the effectiveness of the Covid-19 vaccines made by Pfizer and AstraZeneca.

According to various scientists at Scottish Universities of Edinburgh, Strathclyde, and Public Health Scotland:

‘By the fourth week after receiving the initial dose, the Pfizer and Oxford/AstraZeneca vaccines were shown to reduce the risk of hospital admission from Covid-19 by up to 85% and 94%, respectively, they found.’

US Dollar (USD) Exchange Rates Struggles as Risk-On Market Mood Limits Appeal of Safe-Haven Currencies

The US Dollar struggled against the Pound today as demand for the safe-haven ‘Greenback’ has suffered due to improving risk sentiment.

Now that Covid-19 vaccines are being rolled out across the world, investors are more confident about the outlook for the global economy.

As a result, this has limited demand for safe-haven currencies.

The White House also announced that it expects to finish sending out millions the Covid-19 vaccines this week following the winter storm which disrupted distribution of the vaccine.

Consequently, USD investors are becoming more hopeful about America’s economy. This, however, has also dampened demand for the US Dollar as the outlook for the world’s largest economy improves.

In US economic data, today saw the release of January’s Chicago Fed National Activity Index, which beat forecasts and rose to 0.66.

The Federal Reserve Bank of Chicago commented:

‘The CFNAI Diffusion Index, which is also a three-month moving average, moved down to +0.34 in January from +0.49 in December. Fifty-three of the 85 individual indicators made positive contributions to the CFNAI in January, while 32 made negative contributions. Forty-nine indicators improved from December to January, while 36 indicators deteriorated.’

GBP/USD Exchange Rate Forecast: UK Unemployment Data in Focus

US Dollar investors will be awaiting tomorrow’s testimony from the US Federal Reserve’s Jerome Powell.

Any upbeat comments about the outlook for the US economy could further limit demand for the safe-haven US Dollar.

As a result, we could see the USD/GBP exchange rate continue to slip as risk sentiment improves.

Pound investors will be monitoring tomorrow’s publication of December’s ILO Unemployment Rate report. If joblessness increases, however, then Sterling would suffer.

The GBP/USD exchange rate could continue to head higher, however, if Downing Street’s lockdown exit plan buoys confidence in the UK economy.

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