Pound Sterling US Dollar (GBP/USD) Exchange Rate Recovers Ground as Trade Tensions Mount
UPDATE 16:16 BST: As the Trump administration confirmed its intention to impose fresh tariffs of up to 25% on China this helped to shore up the Pound Sterling to US Dollar (GBP/USD) exchange rate ahead of the weekend.
Markets were not impressed by the move, with Chinese retaliatory measures likely to put increased pressure on the US economy.
An unexpected contraction in the latest US industrial and manufacturing production figures also weighed on demand for the US Dollar (USD).
Pound Sterling US Dollar (GBP/USD) Exchange Rate Climbs Higher on Trump Tariff Worries
UPDATE 11:42 BST: The Pound Sterling to US Dollar (GBP/USD) exchange rate recovered some ground on Friday morning in spite of a lack of fresh UK data.
With forecasts pointing towards a weakening in the latest US Empire manufacturing index and industrial production figures the appeal of the US Dollar (USD) was limited today.
Worries over the impact of additional US tariffs on Chinese products also helped to limit demand for the US Dollar ahead of the weekend.
Stronger US Sales Dent Pound Sterling to US Dollar (GBP/USD) Exchange Rate
UPDATE 16:24 BST: The Pound Sterling to US Dollar (GBP/USD) exchange rate has come under pressure on Thursday afternoon as the latest US advance retail sales data bettered forecasts.
A 0.8% increase in sales on the month suggests that the US economy remains in a robust state of health, giving the US Dollar (USD) further cause for confidence.
The initial positive reaction to the UK retail sales figures, meanwhile, has petered out to leave the GBP/USD exchange rate on a weaker footing.
Pound Sterling US Dollar (GBP/USD) Exchange Rate Climbs in Spite of Fed Interest Rate Hike
The Federal Reserve’s much anticipated decision to raise interest rates at its June policy meeting failed to put any fresh pressure on the Pound Sterling to US Dollar (GBP/USD) exchange rate.
Markets had already effectively priced the impact of a rate hike into the US Dollar (USD), limiting its upside potential on Wednesday night.
Even so, the Fed opted for a relatively hawkish message in its latest communication, indicating an expectation that interest rates will rise two more times before the end of the year.
While there are concerns that the US central bank is taking an overly aggressive pace in tightening monetary policy, this is unlikely to keep USD exchange rates under pressure for long.
Surprisingly Strong UK Retail Sales Figures Boost GBP/USD Exchange Rate
Unexpectedly strong UK retail sales data helped to push the Pound Sterling to US Dollar (GBP/USD) exchange rate higher on Thursday morning.
Sales excluding auto fuel surged 4.4% on the year, suggesting that consumer confidence picked up significantly in May.
This naturally gave investors cause for confidence, as higher levels of consumer spending have helped to drive economic growth in recent years.
Such a solid sign of resilience within the UK economy could encourage greater optimism among Bank of England (BoE) policymakers, meanwhile.
Even in the wake of the week’s disappointing average weekly earnings and consumer price index results this uptick in retail sales have boosted the odds of an August interest rate hike.
As a result, demand for Pound Sterling (GBP) strengthened sharply, recovering much of its losses from the previous days.
GBP/USD Exchange Rate Forecast to Shake Off US Retail Sales Uptick
With forecasts pointing towards a modest improvement in May’s US advance retail sales figure the Pound Sterling to US Dollar (GBP/USD) exchange rate could remain on a stronger footing.
Although confidence in the underlying health of the US economy remains strong an unimpressive sales reading is likely to keep the US Dollar on the back foot against its rivals.
Any fall in the latest jobless claims data may offer USD exchange rates a fresh rallying point, though.
If the US labour market continues to tighten this is likely to give the Fed further incentive to pursue a more aggressive monetary tightening cycle in the months ahead.
As long as markets see a reason to expect a further two interest rate hikes before the end of 2018 this is likely to keep a floor under USD exchange rates.
Brexit Uncertainty to Keep Pound Sterling US Dollar (GBP/USD) Exchange Rate under Pressure
As the next EU summit draws close, the Pound Sterling to US Dollar (GBP/USD) exchange rate looks vulnerable to renewed bearishness.
With key issues such as the Irish border question still unresolved investors remain concerned by the relative lack of progress towards a final deal.
Unless UK and EU negotiators show signs of meaningful progress in the coming days GBP exchange rates look set to lose traction.
With fresh UK data limited ahead of next week’s BoE policy meeting the Pound Sterling to US Dollar (GBP/USD) exchange rate appears unlikely to hold onto its latest gains for long.