Update: Pound to US Dollar Exchange Rate Gains Limited by Persistent Brexit Concerns
A solid US retail sales report and the latest Brexit jitters weighed on the Pound Sterling to US Dollar (GBP/USD) exchange rate on Monday.
As a result of the strong US retail data, the US Dollar (USD) was able to more easily push GBP/USD back from its highs.
The Pound (GBP), on the other hand, was pressured by reports that UK Prime Minister Theresa May could offer concessions to hard Brexit supporting Conservative backbenchers.
(Updated 15:15 16/07/2018)
Pound to US Dollar Exchange Rate Strength Limited as Investors Await Major Data
When markets opened on Monday, the Pound Sterling to US Dollar (GBP/USD) exchange rate edged ever so slightly higher as investors anticipated major UK and US ecostats due throughout the week.
It follows a week of mixed performance for both currencies as speculation about both Brexit and global trade sparked currency volatility.
News that China had filed a complaint over US trade tariffs to the World Trade Organisation (WTO) put extra pressure on USD at the time of writing.
Pound (GBP) Exchange Rates Limp as Investors Await Brexit Developments
Last week was certainly an eventful one for Brexit developments, but not so much for the Pound (GBP) itself as the latest news just meant a fresh round of uncertainties for investors.
The biggest headline-grabbing events included hard Brexit supporters David Davis and Boris Johnson resigning from the UK government in protest over UK Prime Minister Theresa May’s Brexit plan.
Later in the week US President Donald Trump expressed disappointment with the Brexit plan and indicated that the chances of a UK-US deal being fast-tracked after Brexit had dampened.
Overall, the pressure on UK Prime Minister Theresa May to aim for a more hardline Brexit has left Sterling investors anxious, despite Trump later saying that a trade deal was still possible.
This week, Pound investors anticipate a debate in UK Parliament over the Brexit plan, as well as updates on UK wage growth and consumer price pressures.
US Dollar (USD) Exchange Rates Jittery as US-China Trade Fears Persist
US Dollar (USD) demand did improve a little as investors bought safe haven currencies last week, but ultimately persistent concerns about how the US may be impacted by US President Donald Trump’s trade tariffs limited USD strength.
An escalation in the US-China trade war last week bolstered US Dollar demand, as rising Federal Reserve interest rates left investors confident in the US economy despite the looming shadow of a trade war.
However, underwhelming US inflation data weighed on Federal Reserve interest rate hike bets and US Dollar strength, limiting its gains versus the Pound.
Monday saw investors sell the US Dollar a little, as markets reacted to news that China had filed a complaint towards the World Trade Organisation (WTO) about US President Trump’s trade tariffs.
China has yet to announce its own countermeasures against the tariffs.
Pound to US Dollar (GBP/USD) Forecast: Political Developments and Central Bank Speculation in Focus
With the latest Brexit and US-China trade war developments still fresh, those factors will remain a key influence on Pound to US Dollar (GBP/USD) exchange rate movement this week too.
If there are any further signs that the UK government is fissuring on UK Prime Minister Theresa May’s Brexit white paper, the Pound (GBP) may struggle.
Similarly in the US, if upcoming trade developments or data are perceived as being negative for the US economy, Federal Reserve interest rate hike bets could weaken and so could the US Dollar (USD).
High ranking central bank officials including Bank of England (BoE) Governor Carney and Fed Chairman Powell will be delivering potentially influential speeches on Tuesday.
Of course, major UK and US ecostats are likely to drive GBP/USD too. Britain’s latest employment figures will be published on Tuesday, including UK wage growth results. It will be followed by US production data.
Britain’s key June consumer price inflation stats will be published on Wednesday and could have a big impact on the Pound to US Dollar (GBP/USD) exchange rate if they provide any surprises.