Pound Sterling US Dollar (GBP/USD) Exchange Rate Edges Higher as British Economy Stagnates
The Pound Sterling US Dollar (GBP/USD) exchange rate edged higher today, leaving the pairing trading at around $ 1.2417.
Sterling rose on Thursday, firming towards a one-week high against the ‘Greenback’ despite the release of disappointing growth data.
While GBP has held firm against the Dollar in recent days, recent weakness in the safe-haven currency allowed the British currency to make gains.
Data released this morning showed the UK economy was close to stagnant in the three months to February. GDP rose by just 0.1% before the coronavirus pandemic hit the country’s economy.
Reports have also highlighted that the British economy is likely going to be pushed into a historic recession.
Capital Economics’ economist, Paul Dales, noted that these figures were the last that would look anything like normal for a while.
‘The coronavirus lockdown will mean that in March and April GDP will fall at a speed and magnitude no one has ever seen and no economy has ever experienced before.’
US Dollar (USD) Falls Ahead of US Jobless Data
The US Dollar edged lower today, ahead of today’s weekly US jobless claims which are expected to show another 5 million Americans out of work.
If data is in line with forecasts, this would mean around 15 million Americans lost their jobs over just three weeks.
However, a major global recession has been priced in by markets. According to Ulrich Leuchtmann, head of FX and commodity research at Commerzbank:
‘The market is aware of the dramatic effects of the lockdown and is more interested in when these will end. So the U.S. jobless figures are not a big game changer number.’
Meanwhile, last night’s release of the Federal Reserve’s meeting minutes left the Dollar under pressure.
The Fed decided in its last emergency meeting that interest rates needed to be taken closer to Zero and it was likely they would remain there.
The minutes showed policymakers were concerned by the economic impact of the coronavirus and the minutes stated:
‘All participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain.’
Pound US Dollar Outlook: US Jobless Data in Focus
Looking ahead, the US Dollar (USD) could rebound against the Pound (GBP) following the release of today’s US jobs data.
If the number of Americans filing for unemployment skyrockets for the third week in a row, it will weigh on risk sentiment and send traders flocking back to the safety of the US Dollar.
According to Beth Ann Bovino, chief U.S economist at S&P Global Ratings in New York:
‘These dismal numbers suggest another record-breaking April jobs report. America is now in recession and as it appears to deepen, the question is how long it will it take before the U.S. recovers.’
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