Another week of volatility on GBPUSD weeks was seen, as the currency market adjusted to some key new pieces of news. GBPUSD exchange rates saw some wider movements on Tuesday owing to the negative move on Oil prices for WTI (west Texan Intermediate).
The major oversupply of oil is a reflection of the stalling and drop off in economic activity globally, with the US dollar gaining ground against all currencies on this news. As a safe haven currency, in times of economic uncertainty the greenback will typically rise in value, as investors buy US dollars to shield themselves from risk elsewhere.
The oil shock saw GBPUSD levels dip to 1.2256 on the interbank exchange rate, having moved from over 1.25 towards the end of last week. The pound was also weaker on the oil news, since sterling is supported by signs of a strong and healthy global economic outlook.
The dollar is almost acting as a barometer of sentiment towards the coronavirus and the global fightback against the health and the crisis. In times of confidence that the world is moving forward in its approach to reducing deaths and rekindling economic growth the dollar is weaker, as investors have confidence to sell off their safe haven US dollar positions and invest in more ‘risky’, yet profitable investments.
And in times of increasing global uncertainty, the US dollar is rising in value and strengthening against many currencies (including sterling) in the manner described at the beginning of the post.
Key Economic Data Next Week – Where Next for GBPUSD Levels?
Next week is looking a very important one of economic data with both Eurozone and US Gross Domestic Product (GDP) data released. Bearing in mind the importance of global sentiment in the currency market at present, investors will be keen to understand the economic performance for Q1 of these two economies.
Expectations are for contractions, with annualized Q1 for the US expected to come in at -4%, whilst for the Eurozone, year on year is expected to be -1.5%. Sterling will also face some tough challenges with the latest House Price data from Nationwide and more business survey data from the Manufacturing industry.
Coronavirus and its continued economic and health effects continues to influence global exchange rates, speak to our team to learn more about future events and possible effects on exchange rates.
If you have a transfer to buy or sell pounds or US dollars and wish to better understand future events that might change exchanges rates, please do get in touch directly with me to discuss further.