October 29, 2020 – Written by John Cameron
GBP/USD Exchange Rate Sinks as Safe-Haven Demand Soars
The Pound to US Dollar (GBP/USD) exchange rate fell by -0.4% today, with the pairing currently trading around $ 1.294.
The US Dollar (USD) has continued to rise today with investors flocking to the safe-haven ‘Greenback’ as Covid-19 cases rise worldwide, prompting a board market sell-off of risky assets.
With Covid-19 infection rates rising throughout Europe – and lockdowns due to come into place in France and Germany – appetite for the safe-haven has soared.
In US economic data, today saw the flash GDP data beat forecasts and rise by 33.1%, prompting confidence in the world’s largest economy’s recovery.
Richard Flynn, UK managing director at Charles Schwab, commented on the report:
‘Today’s U.S. GDP data shows that the economic recovery has progressed faster than anticipated, but activity has some way to go before returning to its pre-COVID peak.
‘While the market appears to be discounting an optimistic economic outlook ahead, we continue to believe investors should be aware of the potential bumps in the road.’
In the meantime, the US Dollar (USD) will likely head higher as concerns grow over the rising number of Covid-19 cases worldwide.
Pound (GBP) Dips Despite Brexit Hopes
The Pound (GBP) struggled to rise against the ‘Greenback’ despite hopes in a post-Brexit trade deal between the UK and the EU.
Today saw David Frost, the UK’s Chief Negotiator, head to Brussels, where negotiations are set to continue.
However, Downing Street has warned that ‘significant gaps’ remain between the two sides, leaving many GBP investors feeling cautious.
Prime Minister Boris Johnson’s spokesperson said:
‘There is also much work to be done if we’re going to bridge what are the significant gaps that remain between our positions in the most difficult areas and time is very short.’
In UK economic data, today saw the release of the latest Mortgage Approvals figure soar above consensus to above 91 thousand.
Andrew Montlake, managing director of mortgage broker Coreco, commented:
‘The post-lockdown bull run is already over. Lenders have been pulling down the shutters due to ongoing struggles with capacity and concerns over rising unemployment levels, specifically the impact on house price growth.’
GBP/USD Forecast: Could Hopes of a Post-Brexit Trade Deal Boost Sterling?
US Dollar (USD) investors will be awaiting tomorrow’s release of October’s US Michigan Consumer Sentiment gauge.
Any improvement in the outlook for the American economy could weaken safe-haven demand for the ‘Greenback’.
However, the US Dollar (USD) is likely to gain continued support as concerns rise over the global economy, which is likely to be set-back by rising Covid-19 cases.
The GBP/USD exchange rate could edge higher this week, however, if Brexit developments point towards a possible post-Brexit trade deal between the UK and the EU.
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