11 March 2021

Pound US Dollar Exchange Rate Recovers as US Inflation Outlook Takes a Hit

Pound US Dollar Exchange Rate Recovers This Week’s Losses as USD Rally Fades 

The US Dollar’s (USD) surging rebound recovery was short-lived, and the Pound US Dollar (GBP/USD) exchange rate has once again been climbing. The Pound (GBP) remains appealing due to Britain’s economic recovery outlook. 

Last week’s US Dollar rebound dragged GBP/USD lower from 1.3926 to 1.3833 – a drop of almost a cent. The pair also touched on a monthly low of 1.3795 before markets closed on Friday. 

GBP/USD has seen stronger demand this week however, and the pair has essentially recovered last week’s losses. At the time of writing, GBP/USD is trending in the region of 1.3952. 

Tomorrow’s UK data could help the Pound extend its rally if it impresses. Meanwhile, US Dollar investors will once again be looking for signs of US economic resilience. 

Pound (GBP) Exchange Rates Benefit from Rival Weakness 

The Pound has been one of the most broadly appealing major currencies lately. Investors are buying the Pound amid speculation that Britain’s economy could be one of the first major economies to recover from the coronavirus pandemic. 

While Sterling struggled against a resurgent US Dollar last week, Sterling remains appealing even as the US Dollar falls back from its rally. 

Today’s gains were largely due to UK coronavirus recovery hopes and US Dollar weakness. News from UK retailers that struggled due to the pandemic throughout the past year had little impact on the Pound’s movement. 

US Dollar (USD) Exchange Rates Slump as US Inflation Shows Little Sign of Sustained Rise 

Speculation that US inflation was on the rise and could pressure the Federal Reserve to tighten US monetary policy had been among the causes of US Dollar gains recently. 

However, after the publication of US inflation data yesterday, investors reassessed their expectations for US price pressures. 

US inflation fell short of expectations, indicating that the Federal Reserve was not under any pressure to tighten US monetary policy any time soon. This led to a slump in the safe haven US Dollar, as markets felt more willing to take risks again. 

Market sentiment also rose as the US finally passed a large fiscal stimulus package.  

Pound US Dollar (GBP/USD) Exchange Rate Recovery Could Continue on Strong UK Data 

Tomorrow will see the publication of the week’s most influential UK data. It includes UK trade balance production results and growth rate figures from January. 

If Britain’s economic performance was better than expected in January, it could further boost the Pound’s appeal and hopes for momentum in Britain’s economic recovery. 

This could help the Pound to continue its recent rally against the US Dollar. It would be especially appealing if the US Dollar remains weak. 

US data due tomorrow includes Michigan University economic confidence data. Stronger than expected confidence stats could boost the US outlook as well, which may help the US Dollar to avoid more losses. 

Of course, further developments on the coronavirus pandemic and vaccination rollouts in the UK and US could also influence the Pound US Dollar (GBP/USD) exchange rate.