GBPUSD levels have dipped back below 1.25 on the interbank rate, having hit a low of 1.2460 today. The recent high of 1.2642 was just over a month high for the pound against the US dollar. The change in mood on the rate perhaps partly reflects a change in sentiment on the global coronavirus.
Whilst markets have been slightly buoyed by a turning point, as the pace of cases globally slows and some countries appear to be getting a handle on the number of new cases and infections, some countries are still reporting large increases like the US and the UK. There are also concerns that any return to normality might not be as quick as hoped, with suggestions in Europe yesterday that restrictions on movement will only be eased gradually over time and not immediately.
Today sees US Jobless Claims for the United States this afternoon, which could be a good market mover. We also have the latest new tomorrow for China on their GDP (Gross Domestic Product) data which might influence global attitudes on risk and sentiments towards recovery.
Where Next for GBPUSD Rates?
The pound to US dollar rate has been climbing higher as markets embrace the potential recovery ahead for both the UK and the global economy. However, with that recovery far from assured and still huge uncertainty as to the prolonged outcome from social distancing and lockdown measures on the global economy, the pound is sensitive to the news.
The US dollar is a safe-haven currency and may in times of uncertainty rise in value, as proved by the movement on GBPUSD rates down to 1.1435 at the height of recent uncertainty. The extensive support measures taken by both the US and the UK have helped to increase confidence but we are still at early days in determining to what extent the damage ahead will be.
Eurozone Debt Crisis Could Affect USD Rates
Another topic for consideration is Eurozone debt problems, with markets concerned about how the Eurozone will pay for the economic recovery ahead. Currently Eurozone nations sell their own debt individually so markets treat countries like Italy different to say Germany. This is causing concern as to how it will shape the current debt obligations in the future if costs spiral higher like they did with Greece many years ago.
This can in turn lead to US dollar strength, as in times of global uncertainty like that, it would not be surprising to see the US dollar rise as the euro was sold off. EURUSD rate have been trading lower on this news, and this can influence GBPUSD rates as the stronger dollar against the Euro, also ‘weighs’ down the US dollar against the pound.
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