The pound to dollar rate began the week by breaking through the 1.39 resistance level for the first time since 19 March. Providing it with the strength to muscle its way higher was a combination of vaccination optimism in the UK and dollar weakness.
Britain will begin rolling out the Moderna vaccine in mid-April, vaccine deployment minister Nadhim Zahawi confirmed yesterday, adding that the inoculation programme was on course to meet government targets. This followed reports over the weekend that more than 5 million people in the UK have received their second dose of a Covid-19 vaccine.
The dollar slipped to a two-week low against the pound overnight on Tuesday, as traders booked profits after a strong March and a drop in Treasury yields from recent peaks increased pressure on the US currency. The dollar has risen in tandem with Treasury yields this year, as investors bet that massive stimulus and growing vaccinations would inspire the US economy to recover more quickly than other developed nations.
However, it was not long before the dollar rebounded, as short-term optimism about the outlook for the US economy prompted investors to consolidate their positions – by this morning, the pound to dollar rate had fallen to 1.37. The upbeat mood was helped by the IBD/TIPP Economic Optimism Index – an early monthly read on consumer confidence – which rose one point to 56.4 in April, after jumping 3.5 points in March. This represents the fourth straight monthly gain and the highest reading since early February 2020. Optimism surrounding the US economy continues to be propelled higher by vaccinations and fiscal stimulus.
Also aiding the dollar’s recovery was a report from the Labour Department, which showed US job openings climbed to a two-year high in February. The number of available positions rose to 7.37 million from an upwardly revised 7.1 million in January. The increase was inspired by gains in some of the industries hardest hit by the pandemic.
The first data from the UK economy this week is released today: the Markit Services Purchasing Manager’s Index (PMI) for March is forecast to hold steady at 56.8.
The Federal Open Market Committee’s meeting minutes, due this afternoon, will outline members’ thinking from their March meeting. The release will be scoured by investors for clues to the logic, timing, and size of any change to the US central bank’s monetary policy.
The US Goods and Services Trade Balance for February is also scheduled for release today and is forecast to show an increase in trade deficit from January.
Speak to us ahead of your pound to dollar exchange to discuss the impact of these data releases in further detail.