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Pound to Dollar Rate Slides Sharply

March 23, 2021 - Written by John Cameron

Pound Dollar Exchange Rate Sinks as UK-EU Vaccine Tensions Dampen UK Market Confidence

The Pound US Dollar (GBP/USD) exchange rate fell by -0.5% following yesterday’s comments from Prime Minister Boris Johnson, who warned that Europe’s third-wave of Covid-19 infections will ‘wash up on our shores’. The pairing is currently fluctuating around $1.37.

Added to the UK’s concerns are possible shortages of AstraZeneca vaccines, which the EU has threatened to ban from exporting to Britain.

However, today saw the news that the UK Government would be keen to offer support to the EU in the form of AstraZeneca’s vaccine production plant in the Netherlands.

Sources within the Dutch government said:

‘There hasn’t been a request but the system means that whatever decision we make it has to go to European commission and if they want to block it they can.

‘It would be better if we didn’t get to that point and AstraZeneca, the British government and the European commission could just find an agreement. AstraZeneca has oversold what they could do to everyone.’

Meanwhile, today saw the publication of the latest UK unemployment report for January, which fell below forecasts and rose by 5% instead of the projected 5.2% figure.

Now that joblessness has fallen for the first time since the beginning of the Covid-19 pandemic, GBP investors are becoming more hopeful about Britain’s economy in the months ahead.

US Dollar (USD) Exchange Rates Rise as Risk-Off Market Mood Drives Demand for ‘Greenback’

The US Dollar (USD) has benefited from its safe-haven status today because of growing tensions between many Western nations – including the US and the EU – and Beijing.

The UK’s Foreign Ministry described the situation:

‘Acting together sends the clearest possible signal that the international community is united in its condemnation of China’s human rights violations in Xinjiang and the need for Beijing to end its discriminatory and oppressive practices in the region.’

Consequently, demand for safe-haven currencies like the ‘Greenback’ have risen as tensions between China – the world’s second-largest economy – and key Western nations are dampening risk appetite.

US Dollar (USD) traders will be awaiting today’s testimony from eh Federal Reserve’s Chairman, Jerome Powell.

Any dovishness about the outlook for the American economy, however, could further drive-up demand for the safe-haven ‘Greenback’.

GBP to USD Forecast: UK Services PMI in Focus

US Dollar (USD) traders will be awaiting tomorrow’s release of the latest US Durable Goods Orders figure.

If this points to an improvement in the US economy, however, then we could see the ‘Greenback’ shed some of its gains as global risk sentiment improves.

Pound (GBP) traders will be eyeing tomorrow’s publication of the latest flash UK Services PMI for March.

Any improvement in the UK’s largest sector would boost the Pound to Dollar exchange rate.

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