Pound to US Dollar Exchange Rate Near Month-And-A-Half Worst as US Growth Report Comes In

The British Pound to US Dollar (GBP/USD) exchange rate has been tumbling this week, as investors seeking safer assets buy the US Dollar against a weaker Pound. While the pair flounders near lows, markets await tomorrow’s key UK and US data.

Since GBP/USD opened this week at the level of 1.3869, the pair has been trending with a bearish bias. GBP/USD touched on a low of 1.3673 this morning, the pair’s worst level since the beginning of February over a month and a half ago.

At the time of writing, Sterling is steadying slightly. However GBP/USD gains are limited and the pair still trends low in the region of 1.3700.

Investors have found little reason to buy the Pound this week. At the beginning of the week, the British currency was throttled by fresh UK-EU trade tensions and concerns over coronavirus vaccine shipments, as well as some market risk-aversion.

After that, Tuesday’s UK inflation rate data disappointed and hit Sterling as markets pulled back on speculation that the Bank of England (BoE) could become hawkish any time soon.

While these were the primary causes of Pound weakness this week, Sterling was also weighed slightly by today’s data.

The Confederation of British Industry (CBI) published its latest retail data, which showed a bigger contraction of retail activity in March than expected.

The CBI expects retail to recover somewhat in April. However, for now the data weighed on the Pound and made markets more anxious ahead of tomorrow’s UK retail sales results from February.

Meanwhile, the US Dollar continued to benefit from higher market demand for safe havens, combined with higher expectations for US economic health.

The US Dollar is often appealing in times of global uncertainty. This has been one of the primary causes of US Dollar gains this week, as fears of a ‘third wave’ of coronavirus infections rise globally.

Supporting the view that the US economy could continue to recover from the pandemic, today’s YS growth rate report beat forecasts.

The final Q4 growth rate for the US showed that growth improved at 4.3% quarter on quarter in Q4, rather than the expected 4.1%. It kept the US Dollar appealing today.

However, a late-week shift in GBP/USD movement is still possible. Tomorrow will see the publication of potentially influential stats, including UK retail sales results and US PCE inflation rate data.

If Britain’s retail sales results disappoint investors, markets could become more concerned about Britain’s economic resilience to the pandemic. This could lead to continued Sterling weakness into next week.

On the other hand, stronger than expected retail stats could help the Pound to mount a recovery against the US Dollar.

The US Dollar’s movement could be influenced by upcoming US PCE inflation rate data. As PCE is the Federal Reserve’s preferred inflation measure, poor US inflation could cause Fed speculation to turn even more bearish and this could weigh on this week’s US Dollar strength.

Of course, any potential shifts in the coronavirus situation or market sentiment could also influence the Pound to US Dollar exchange rate before markets close for the week.