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Pound US Dollar (GBP/USD) Exchange Rate Falls as Demand for Safe-Haven USD Increases

April 6, 2021 - Written by John Cameron

GBP/USD Exchange Rate Fall as Risk-Off Markets Boost Safe-Haven Demand

The Pound US Dollar (GBP/USD) exchange rate fell by -0.4% today as demand for the safe-haven US Dollar has risen as Europe suffers from a third-wave of Covid-19. The pairing is currently fluctuating around $1.38.

The US Dollar (USD) has benefited from souring risk-sentiment today, with concerns growing for the global economy as Europe suffers from a rising number of Covid-19 cases.

Marios Hadjikyriacos, an investment analyst at brokerage XM, commented:

‘It is difficult to be pessimistic on the dollar as the U.S. economy is already stronger than Europe’s thanks to fewer lockdowns, is miles ahead in the vaccination race, and has more stimulus coming.’

Mark McCormick, the global head of foreign-exchange strategy at TD Securities, also said:

‘The USD level has now outstripped the pickup in non-U.S. growth expectations [meaning] there’s room for a USD pause.’

However, the US economy is showing signs of robust improvement, which has boosted confidence in the global economy.

As a result, we could see the US Dollar’s (USD) gains being short-lived if risk-sentiment improves.

Pound (GBP) Exchange Rate Falls as UK Covid-19 Vaccinations are Expected to Slow Down

The Pound (GBP) struggled today following news that England’s Covid-19 vaccination efforts could drop by 2.7 million vaccines a week until July, according to the Sage scientific advisory committee.

The Sage SPI-M modeling subcommittee commented:

‘As the dates of second doses for the over-50-year-olds are now largely fixed, this slower scenario has the effect of reducing the proportion of under-50-year-olds who are protected at the time of steps 3 and 4.’

As a result, UK markets are becoming increasingly cautious as this could jeopardise the easing of lockdown measures and threaten a third-wave of Covid-19.

There is no notable UK economic data today, however, which has left the Sterling exchange rate in a precarious position.

Yesterday also saw Prime Minister Boris Johnson remain hesitant about the UK’s future with Covid-19, leaving UK markets in a state of caution.

Pound US Dollar (GBP/USD) Exchange Rate Forecast: Could a Strong UK Services PMI Boost Sterling?

US Dollar (USD) traders will be awaiting tomorrow’s release of the latest FOMC Minutes. Any further bullishness about the American economy would prove USD-positive.

USD traders will also be eyeing the latest US Goods and Services Trade Balance report for February. If this points to an improvement in the US economy, then the USD/GBP exchange rate could head higher.

Risk sentiment will also continue to drive the ‘Greenback’ this week. If Covid-19 cases continue to rise in Europe, then demand for the safe-haven USD could rise.

Pound (GBP) traders will be awaiting tomorrow’s release of March’s UK Services PMI. Any improvement in the outlook for the UK’s largest sector would boost the Pound US Dollar exchange rate.

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