Pound to Dollar Rate Falls Ahead of ‘Freedom Day’ Announcement

Pound to Dollar Rate Moves Higher Following Fed Meeting Minutes

Concerns abounded last week that a sudden spike in Britain’s Covid-19 infection rate will force Prime Minister Boris Johnson to delay the full reopening of the economy scheduled for 21 June – with a decision due to be announced today. The pound subsequently slipped 0.3% to around 1.41 in the five days through Friday. This represented the second straight weekly decline for the pound vs dollar rate – which had traded as high as 1.4248 on 1 June – as the prospect of a delay to ‘Freedom Day’ soured sentiment.

With few major developments to influence the pound’s fortunes of late, investors were focused on key production releases from the UK economy on Friday. The Office for National Statistics (ONS) said Gross Domestic Product rose for the third consecutive month as lockdown restrictions were eased across the UK. The economy grew by 2.3% in April – the fastest pace since the July reopening from lockdown last year – as the easing of restrictions triggered a rebound in consumer spending. Overall GDP grew by 1.5% in the three months to April compared with the previous three months.

According to the latest ONS growth overview, the construction sector slumped by 2% in April following notable growth in March, while industrial production slipped by 1.3%.

Dollar steadies

The dollar found itself on firmer footing on Friday following a week in which currency markets had been sluggish in anticipation of key US consumer price data. However, when the CPI came in above expectations, they appeared to shrug it off. The Federal Reserve has repeatedly said it expects any rise in inflation to be a temporary blip and that it is too early to discuss scaling back its fiscal stimulus programme. Consumer prices rose 5% year-on-year in May, the biggest leap in almost 13 years, the US Department of Labour Statistics said on Thursday.

US consumer sentiment grew more than expected in June, the University of Michigan said on Friday. The Michigan Consumer Sentiment Index rose to 86.4 from 82.9 in May and 78.1 in June last year.

Looking ahead

A quiet day in the economic calendar on both sides of the pond means investors must wait until tomorrow for the first releases of note, which include: the UK Claimant Count Change for May, the UK ILO Unemployment Rate for the three months to April, and US Retail Sales.

Investors in the dollar are looking ahead to the Federal Open Market Committee meeting on Thursday for clues around the central bank’s strategy for reducing its massive bond-buying programme.