Week in Review: US Dollar Stands out as Top Performer but Coronavirus Gains Could Dwindle

Pound to US Dollar Rate Outlook: GBPUSD Drives Lower on Global Uncertainty

In a week that was dominated by coronavirus headlines, USD fared better than most as it earned the title of top performer of the week. The coronavirus was not the only event which benefitted USD, as the world’s largest economy saw positive boosts from its economic data releases which allowed it to propel to new highs over the course of the week. The ISM manufacturing PMIs, factory orders, services and non-manufacturing PMIs all came in above expectations. Looking ahead to next week, the USD’s gains from the coronavirus could dwindle as fears surrounding the virus have begun to decrease after Chinese scientists claimed to have found an effective treatment.

Coronavirus Fears Helped the USD Gain on Competitors as It Was Labelled Favoured Safe Haven

USD continued to gain this week on the back of a few weeks of fears surrounding the coronavirus outbreak. As the disease continued to ravage China and spread to many other countries, USD found support from investors as a preferred safe haven. USD fared better than other safe haven currencies like the Japanese Yen and the Swiss Franc as both of these currencies are heavily linked to China in a trade sense. However, reports throughout the week suggested that Chinese researchers had a breakthrough in the treatment of the coronavirus. This news swept the market with a wave of optimism which saw risk-sensitive currencies rise again, meaning many investors left the safe haven USD, slightly reducing its domineering power. The decline could continue into next week as the market’s optimism continues to rise on the back of limited shocks surrounding the virus in the latter stage of the week. Investors in USD will be keen to observe headlines over the weekend to determine the direction of USD based on the coronavirus fears.

US Data Releases Labelled ‘Pick of the Week’ for Currency News as Figures Beat Projections

The United States saw and conquered many of its economic data releases this week. Monday started things off with the Markit Manufacturing PMI for January which came in at 51.9, up from 51.7. Following this later in the day was the ISM Manufacturing PMI for January which rose from 47.8 to 50.9. as one of the key economic indicators for USD, this figure helped sky rocket support for the currency. Later in the week on Wednesday, the US saw its Markit services PMIs which came in above predictions at 53.4 up from 53.2. The bigger shock of the day came from the ISM non-manufacturing PMI which rose from 54.9 from 55.5. Finally, the last day of the trading week on Friday saw the nonfarm payrolls and average hourly earnings for January come in above expectations at 225k up from 147k and 3.1% from 3% respectively.

USD is likely to rally over the news over the weekend as it rightly celebrates a successful week of economic releases. Investors will keep an eye on the coronavirus updates also as the United States awaits next weeks consumer price indexes.

If you would like to learn more about factors influencing GBP/USD exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.