- Pound (GBP) advances as economy continues to reopen
- US Dollar (USD) slips ahead of FOMC rate announcement
- No action expected, GDP & inflation forecasts to be closely watched
- At 07:15 UTC, GBP/USD is trading +0.2% at US$1.2750
The Pound is holding onto gains reached overnight and charging higher for a tenth straight session, in a phenomenal rally. After gaining 2.5% across the previous week, the Pound is adding 0.6% so far this week.
At 07:15 UTC, Pound to US dollar (GBP/USD) is trading +0.2% at US$1.2750, just a few points off the high of the day ahead of the US Federal Reserve monetary policy announcement later.
Optimism surrounding the reopening of the UK economy is lifting the Pound on Wednesday. British business secretary Alok Sharma confirmed that all shops in the UK will be able to reopen on 15th June. Additionally, drive through cinemas, zoos and safaris will also be able to reopen.
As the economy slowly starts to reopen, consumption can start to increase which will be good news for the UK’s economy; an economy that is so dependent on consumers.
There is no high impacting UK data due for release today, so sentiment will continue to drive the Pound. Investors will turn their attention towards Friday’s GDP release, which is expected to show that the UK economy contracted by -18.4% in April, down from -5.8% in March.
The rise of the Pound over the past 10 sessions has been in part thanks to the falling US Dollar. The US Dollar is once again edging lower as investors sell out of the safe haven currency.
Dollar investors will now look ahead to the Federal Reserve monetary policy announcement later today. After dropping interest rates to close to 0% and announcing unlimited bond buying across the past 10 weeks, the Fed is not expected to take any action.
Investors will be most interested in the central banks’ quarterly GDP and inflation forecasts and the tone which the Fed adopts. The Fed didn’t produce forecasts back in March, owing to the uncertainty of the coronavirus situation that lay ahead.
Following on from the impressive US jobs data, encouraging mortgage and car sales figures, the Fed will need to strike a balance between applauding recent data, whilst still leaning on the side of being accommodative.
The Fed is not expected to give too much detail on its future plans given that the path of the economy remains so uncertain.
