Pound Sterling exchange rates are strong despite the damage done by the coronavirus lockdown. Pound-to-Dollar rate posts 33-month high above 1,3760 in the middle of the renewed US losses
Overall, Pound Sterling sentiment has held firm with the change in Bank of England expectations and robust global risk appetite offsetting the near-term weakness. The Pound-to-Euro exchange rate has settled just above 1.1400.
The Pound-to-Dollar exchange rate has posted 33-month highs around 1.3780, with the US currency that is subjected to renewed selling in global currency markets.
GBP/USD Break Above 1.3750/60 Important
The head of the European currency strategy at TD Securities, Ned Rumpeltin, commented, “Sterling is benefiting most from the vaccine race – it’s really the main differentiator.” He added that the British pound has struggled to break above the 1.3700 area level since 2018.
A breaker higher would have important implications for funds, which could drive sustained British pound buying. According to Commerzbank, the importance of 1.3760 and was still cautious. “However pressure currently remains on the topside and above 1.3760 lies the 1.3836 February 2016 low. Longer-term, the 2018 peak at 1.4377 is being targeted.”
Confidence will dip once more of the GBP/USD break higher fails to hold with the price action as of February 9 is watched closely.
US Dollar (USD) Back Under Pressure
After posting the US dollar’s net gains last week, the currency has lost ground once again in global currency markets with renewed expectations that a very dovish Federal Reserve policy would secure the coin. The Euro-to-Dollar or EUR/USD exchange rate had recovered to 1.2080 from lows near 1.1960 last week.
The Commonwealth Bank of Australia currency analyst Joseph Capurso said, “The bottom line is a large stimulus is highly likely to pass soon, exacerbating the widening in the U.S. current account deficit, and weighing on the USD.” Meanwhile MUFG said “We continue to believe that it is still too soon for the US dollar to stage a sustainable rebound.”
The Shift in BoE Expectations Continues to Provide Pound (GBP) Support
The British Retail Consortium and KPMG monitor stated that the total retail sales in the United Kingdom registered a 1.3% annual decline in January 2021. The proportion of non-food shopping that was bought online skyrocketed to 61%.
BRC Chief Executive Helen Dickinson said, “January saw retail sales growth declined to its lowest level since May of last year. The current lockdown has hit non-essential retailers harder than in November, with the new variant hampering consumer confidence and leading customers to hold back on spending, especially on clothing and footwear.”
Barclaycard recorded a 16.3% yearly decline in spending, this is the weakest figure that they recorded since May 2020 which indicated underlying issues.
The NIESR also removed the 2021 GDP growth forecast to 3.4% from the 5.9% estimate in November 2020. The NIESR also pointed to vital risks “There are major risks to the downside associated with the roll-out and effectiveness of vaccines, the emergence of new Covid-19 strains and their effect on the path of the virus, which might imply the continuation of lockdown measures for a longer period, suppressing domestic demand.”