Update: Pound to US Dollar Exchange Rate Rebounds Slightly from Worst Levels
Despite some better-than-expected US data on Monday afternoon, the Pound to US Dollar (GBP/USD) exchange rate rebounded slightly from its worst levels.
After testing a 2018 interbank low of 1.33 in the morning, GBP/USD spent most of the day trending nearer the level of 1.34.
The Chicago Fed national activity index for April was published during the American session, and improved from 0.32 to 0.34. This came in well above the forecast 0.14.
However, Pound investors awaiting this week’s key UK inflation and retail sales stats were hesitant to let GBP/USD drop much further.
GBP/USD could still see further losses later in the week if the Pound outlook worsens.
Pound to US Dollar (GBP/USD) Exchange Rate Hits 2018 Lows as US-China Trade Jitters Fade
Things keep looking up for the US Dollar (USD), as on top of a solid US economic outlook and rising Federal Reserve interest rate hike bets, the Pound to US Dollar (GBP/USD) exchange rate is now being dragged lower by the latest trade developments.
Last week saw GBP/USD fall by almost a cent, with the pair slipping from the interbank level of $1.35 to $1.34 throughout the week.
On Monday, GBP/USD has continued to tumble with the interbank level briefly touching on a low of $1.33 for the first time since late-2017.
Sterling (GBP) lacked the strength to hold its ground against a broadly stronger US Dollar (USD), hindered as the ‘Greenback’ was supported by news that trade negotiations between the US and China had reached a truce.
With market fears of a potential trade war between the US and China now fading, the US Dollar has seen stronger demand.
Pound (GBP) Exchange Rates Falter as Investors Anticipate Data
Investors have had little reason to remain firm on Sterling (GBP) over the past week, especially amid the US Dollar’s (USD) recent strength.
While there have been headlines suggesting that the UK government intends to keep the nation within an EU customs union following Brexit, this speculation has not been widespread enough to bolster Sterling support significantly.
Furthermore, UK data has been repeatedly unsurprising or disappointing, with little to suggest that Britain’s economy will be strong enough to support tighter monetary policy from the Bank of England (BoE) any time soon.
As a result, investors are anticipating more solid UK developments such as firm data or confirmed Brexit news before making major moves on Sterling.
US Dollar (USD) Exchange Rates Continue to Rally on Trade Developments
The weekend’s news that the first set of trade negotiations between the US and China had been optimistic bolstered demand for the US Dollar (USD) even further, helping the recently strong currency to continue its rally.
The US Dollar has been rallying since April on market expectations that the US economy will continue to strengthen, and that the Federal Reserve will continue to hike domestic interest rates at a faster pace than most other major central banks.
So with the US domestic outlook strong, the improving global trade outlook has made the US Dollar look even more appealing to investors.
Following the latest optimistic US-China trade negotiations, Washington announced that its plans to enforce trade tariffs against China would be put on hold for now. This doused concerns that the US could spark a trade war.
Pound to US Dollar (GBP/USD) Forecast: Major UK Ecostats Could Boost GBP/USD
If trade news continues to benefit the US Dollar (USD) in the coming sessions and UK data disappoints investors, the Pound to US Dollar (GBP/USD) exchange rate could continue to trend near its worst 2018 levels.
However, if upcoming UK ecostats are better than expected this could bolster Bank of England (BoE) interest rate hike bets and make the Pound (GBP) a lot more appealing again.
Wednesday will see the publication of Britain’s April Consumer Price Index (CPI) results, which are expected to have improved slightly.
A bigger-than-expected improvement would boost hopes that Britain’s inflation rate is more sustained than feared and could make the Bank of England more eager to tighten UK monetary policy this year.
Similarly, if Thursday’s UK retail sales results beat expectations economists may become more confident that weakness in consumer activity was caused by poor weather in Q1 rather than a genuine low trend in activity.
Friday’s UK growth projections, as well as US PMI projections and house sales stats could also influence movement in the Pound to US Dollar (GBP/USD) exchange rate this week.