GBP / USD exchange rate rebounds following volatile trade
The British pound (GBP / USD) exchange rate wobbled this week as coronavirus concerns plagued the UK services impressive PMI.
Strong data from the United States put pressure on the pound, before the disappointing US nonfarm wage release on Friday saw the dollar drop its gains.
British pound (GBP) strengthens on services PMI
The pound started the week with comments from Bank of England (BoE) policymaker Gertjan Vlieghe, who hinted at the possibility of a more hawkish stance.
However, very early in the week’s trading session, coronavirus concerns sent the pound down. Cases of the Delta variant continued to increase in the UK, prompting discussions about postponing the end of restrictions in the UK.
Sterling regained some ground on Wednesday after Boris Johnson tried to allay concerns by saying there is “nothing in the data at the moment that means we cannot move forward with Stage Four” relaxation of restrictions.
The finalized UK services PMI also gave a boost, with the pound jumping against many of its peers after the services sector growth figures in May hit a 24-year high.
Yet the increase in coronavirus cases continued to put pressure on the pound, limiting its rise, and the pound’s exchange rate fell to a two-week low following equally strong data from the United States.
Finally, the pound rebounded against the US dollar after disappointing new US employment data on Friday.
US Dollar (USD) Undermined by Conflicting Data Releases
Meanwhile, the US dollar was on the defensive at the start of the week, as US President Joe Biden’s budget proposal sparked optimism among investors, triggering a risky market mood that weighed on the safe-haven currency. .
The “greenback” found some support mid-week following a rise in Treasury yields and hawkish remarks from Philadelphia Fed Chairman Patrick Harker, who suggested it was time to ” think about »a reduction.
However, the rise in the pound meant that the USD was in a range against the GBP.
The US dollar then surged in response to a trio of impressive US data releases from the United States. The May non-manufacturing ISM PMI showed record growth for the US service sector, beating market expectations.
Strong employment data followed. A drop in jobless claims was reinforced by the ADP jobs report, which exceeded expectations by 50%, with 978,000 new workers hired in the United States in May.
The US dollar lost its gains after non-farm payrolls figures printed below expectations, causing the GBP / USD exchange rate to rebound.
GBP / USD exchange rate forecast: US data and coronavirus concerns could hurt sterling
Looking ahead to next week’s trading session, developments in coronaviruses could dominate sterling exchange rates for most of the week as there is no release of major data in the Kingdom. – United before Friday.
Sterling investors will be looking for any sign that the planned end of all UK restrictions on June 21 may be delayed, as concerns over the Delta variant of the virus continue to play into the sterling.
The “greenback” could benefit from the latest figures for core inflation in the United States on Thursday, with growth expected to 3.2%, against 3% last month, the largest annual increase in 25 years.
With recent clues from the Federal Reserve policymakers to discuss cutting bond purchases soon, higher inflation may cause USD investors to consider the start of reduction talks more likely.
As for the British pound, UK trade balance figures on Friday are expected to show the country’s trade deficit is widening. Friday will also see the release of UK monthly GDP figures for April, with growth expected to have risen from 2.1% to 2.5%.