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Pound to Dollar Rate Reverses Losses

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The pound to dollar rate slid lower against on Thursday morning after it emerged that England’s current lockdown will rumble on for at least another five weeks. On Wednesday, Boris Johnson dashed hopes that schools will reopen after the February half-term. If the vaccine rollout continues to progress as planned, he said the Government hopes “it will therefore be safe to begin the reopening of schools from Monday March 8, with other economic and social restrictions being removed thereafter, as and when the data permits”. He offset his downbeat comments by promising to publish a roadmap out of coronavirus restrictions for the nation next month.

The confirmation is a blow for the UK economy – and the pound – with non-essential retail not expected to reopen until at least April, while pubs and restaurants could remain closed until May.

Solid Data Subdues Dollar

The pound to dollar rate was also given a push lower by souring risk appetite yesterday morning, which sent the safe-haven dollar higher. Falling domestic stock markets in the US on Wednesday, in Asia overnight, and in Europe on Thursday contributed to the shift in investor sentiment.

The US Federal Reserve left its benchmark interest rate near zero on Wednesday evening and pledged to continue injecting money into the economy via bond purchases, acknowledging that “the pace of the recovery in economic activity and employment has moderated in recent months”.

On Thursday, it was revealed that the US economy closed out 2020 with a lower-than-expected gain. Gross domestic product grew at a 4% annualized pace in the fourth quarter – below the 4.3% forecast. The figures shed a positive light on the economy, which ended the year in relatively good shape having battled with unprecedented pandemic and political headwinds.

Better-than-expected weekly Initial Jobless Claims data complemented the GDP figure, indicating that 847K people filed for unemployment support in the previous week – less than had been forecast by the market.

The solid datasets reduced the dollar’s safe-haven appeal, causing the pound vs dollar rate to mount a recovery – by yesterday evening, the pair had reversed its losses having shot back above the 1.37 level.

Looking Ahead

A particularly quiet week in the UK’s economic calendar is rounded off with another barren day. Over in the US, however, the data keeps on coming with a slew of figures slated for release: Core Personal Consumption Expenditure – Price Index, Personal Income, Personal Spending, Chicago Purchasing Managers’ Index, Michigan Consumer Sentiment Index, and Pending Home Sales. New Treasury Secretary Janet Yellen is scheduled to give a speech that could provide further details of the economic outlook.

If you’d like to discuss these economic releases across the pond in further detail, feel free to get in touch using the form below. I’ll be happy to respond personally.

The post Pound to Dollar Rate Reverses Losses appeared first on Pound Sterling Forecast.


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