Pound US Dollar Exchange Rate Outlook
The Pound to Dollar exchange rate (GBP/USD) clambered above 1.3700 by Thursday morning as investors cheered the return of risk-on into markets. A couple of days of lower infections is also good news for Cable, with some bulls potentially optimistic that the peak is in for Delta. Regardless of infections, deaths are rising and the potential for a dangerous variant to mutate amid the dramatic wave of cases is very real. Buoyed by a down day for the Dollar index, the GBP fundamentals are also being damaged by the return of Brexit disputes over Northern Ireland to the headlines.
Analysts at Scotiabank are not too optimistic about Sterling’s prospects, pouring cold water on the hopes of a dramatic return to 1.40 over the coming days and weeks, stating,
“With the fast spread of the delta variant that has seen hospitalizations climbing (as well as a slight increase in deaths), and continued disputes with the EU (and, at this rate, low odds of
the bloc granting financial equivalence), the near-term outlook for the GBP looks bearish unless solid upside data surprises motivate a more hawkish BoE. A return toward the 1.40 mark looks unlikely at the moment.”
Euro (EUR) Exchange Rates Await ECB
The Euro was unlikely to do anything too dramatic yesterday as investors eye the ECB today. With a vulnerable Dollar, however, EUR/USD was able to climb almost to 1.18 as brighter performances from global stocks boosted yields and gave the reflation trade some hope. Holding firm as somewhat of a haven during the early turbulence in the week, the Euro is poised to be well-positioned to appreciate back towards 1.20 if the good times continue to roll. Beyond that, it will take a much larger buying effort than we have seen to overcome sturdy U.S. growth prospects.
US Dollar (USD) Outlook
As most of the talking heads in financial media made the case for vaccinations against the spread of the Delta variant, so did Wall Street continue to press higher. U.S. yields rose, with the Dollar heading in the opposite direction. Today finally sees some economic data with initial jobless claims particularly important for traders trying to gauge the strength of the rally.
The Japanese Yen was firm on Thursday morning, pushing lower into the 110 handle as Japanese markets observe another holiday. The CAD was the most notable underperformer as the Loonie was hit by a dip in oil prices early in the session, sending USD/CAD up 0.2%. Bitcoin enjoyed a strong rally from the dip as Elon Musk reaffirmed the possibility that Tesla would buy BTC, sending the major crypto over $32,000.
The Day Ahead
As mentioned above today’s big event is the ECB meeting and accompanying statement from President Lagarde. In the U.S. initial jobless claims are the big release, with existing home sales also on tap. Outside of this, coronavirus cases and bonds are the big macro theme playing out in exchange rates.
Read More: Potential Delta Wave Peak Boosts Pound Outlook Vs Euro And Dollar