The Pound to US Dollar exchange rate fell -200 pips to hit a one-month low last week as rapid expansions in US private sector output boosted the ‘Greenback’ and political uncertainty lingered over the Pound.
Will GBP/USD extend losses this week?
Pound to US Dollar Exchange Rate Slides -200 Pips to 1-Month Low
The US Dollar (USD) benefitted from rising Federal Reserve rate hike expectations last week as US manufacturing output rose to a 13-year high of 60.8, US service sector activity hit a 12-year high of 59.8 and US average earnings rose unexpectedly from 2.7% to 2.9%.
Meanwhile, lacklustre UK data reduced the appeal of the Pound: manufacturing output slowed to 55.9, service sector growth inched higher to 53.6 and construction activity shrank for the first time in over a year, with a score of 48.1.
Furthermore, demand for Sterling was hit by political concerns as speculators hedged against a mutiny in the ruling Conservative party.
Analysts are worried that Prime Minister Theresa May’s fragile position could prompt a leadership contest, which would most likely make it even more difficult for the British government to press ahead with tough Brexit negotiations.
Political Concerns Continue to Weigh on GBP/USD This Week
This week’s economic calendar features a number of mildly important ecostats, but there’s nothing that looks to have the potential to bring about a massive shift in GBP/USD exchange rate sentiment.
A big upward surprise in Tuesday’s UK industrial production print could give Sterling a leg-up, but anything close to the expected score of 0.9% is unlikely to have a massive impact.
US releases such as retail sales, Michigan consumer sentiment and the consumer price index are all predicted to print positively, making it difficult to see Sterling mounting any serious rallies.
This leaves the Pound US Dollar susceptible to further losses if speculation continues to mount over a Tory party leadership contest or if little progress is made during this week’s Brexit negotiations.