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GBP/USD Forecast: Pound to US Dollar Exchange Rate Weakens on US Inflation Data

May 13, 2021 - Written by John Cameron

The Pound to US Dollar (GBP/USD) exchange has weakened today after markets digest the latest rise in inflation from the US.

At the time of writing the GBP/USD pairing are trading at around $1.4033 as optimism surrounding the UK’s lockdown easing helps to limit any major losses.

Pound Sterling (GBP) Exchange Rate Weakens on Lack of Data

In absence of any notable data from the UK today the Pound has been open to losses against the US Dollar.

However, any major losses have been limited as Sterling continues to be driven by lockdown easing optimism.

The third stage of England’s roadmap out of restrictions are to come into force on the 17th May with indoor hospitality reopening and the return of museums and theatres.

Despite concerns over the Indian variant of the coronavirus, Prime Minister Boris Johnson has been optimistic over a full opening out of restrictions by the 21st June.

Speaking earlier today the Prime Minister said:

‘We are anxious about it - it has been spreading. We’re ruling nothing out. At the moment I can see nothing that dissuades me from thinking we’ll be able to go ahead on Monday and June 21 everywhere.’

US Dollar (USD) Exchange Rate Supported by US Inflation Data

The US Dollar has found itself supported against many of its major rivals today following the latest annual inflation from the US which rose to the highest level since 2008 at 4.2%.
The unprecedented rise saw markets become increasingly concerned that the Federal Reserve could hike interest rates sooner than expected as the US economy enjoys a rapid recovery from coronavirus.

Sophie Griffiths, market analyst at OANDA, commented on the rise in inflation saying:

‘US inflation jumping to its highest level in 13 years has spooked the market, whilst a sell off in commodities is giving the bears more room to run.’

‘Inflation fears have been stalking the market all week and are showing few signs of easing. Whilst some inflation is good for companies and the market, the latest US consumer price data points to the balance moving too far in one direction.

This afternoon has seen the release of the latest initial US jobless claims for the week ending 8 May which saw claims fall to a pandemic low of 473,000, the lowest reading since jobless claims surged at the start of the pandemic in March 2020.

GBP/USD Exchange Rate Forecast: US Retail Sales in Focus

For US Dollar investors, tomorrow will see the release of the latest retail sales data from the US for April which are forecast to have risen 0.3% as more businesses reopen from coronavirus restrictions across the country.

In absence of any notable data from the UK, Pound traders will instead be focusing on the latest lockdown easing across the nation.

Traders will hope that any spikes in cases or deaths will not derail the UK’s roadmap out of lockdown.

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