GBP/USD Exchange Rate Slumps as Carney Predicts Brexit Will Cause Food Price Increases
UPDATE: The Pound US Dollar (GBP/USD) exchange rate, despite gaining some ground this morning, has slumped over the course of the afternoon, and is currently sitting at an inter-bank rate of $1.2769.
Speaking earlier Mark Carney, Governor of the Bank of England, stated that if a no-deal Brexit were to take place, the average food shopping bill will rise by 10% in ‘the most extreme scenario’, whereas if there is a more orderly Brexit, there will be a rise to 6%.
The earlier rally from the Pound was undoubtedly a result of the statements from Manuel Campos Sánchez-Bordona, European Court of Justice Advocate General, who stated that he believed if a country decided to leave the EU, they should have the ability to change their mind during the two-year exiting process that is specified in Article 50.
GBP/USD Exchange Rate Still Trading Down despite Sub-par US Data
UPDATE: The Pound US Dollar (GBP/USD) exchange rate is currently attempting to claw back some of the losses made in today’s session so far after the release of some mixed US data.
The USD Markit manufacturing PMI for November reported a figure of 55.3 which has decreased since last month, despite the prediction this figure would remain steady.
Further disappointment came from the ISM prices paid manufacturing index for November as there was a greater-than-expected fall in the figure compared to last month, dropping to 60.7 from 71.6.
The US ISM manufacturing PMI for November showed a better-than-expected jump to 59.3 despite a forecast suggesting this figure would drop, although this has not done anything to prevent GBP from edging closer.
The GBP/USD exchange rate is currently sitting at an inter-bank rate of $1.27.
GBP/USD Exchange Rate Sinks despite ‘Mini Breakthrough’ between US and China
The Pound US Dollar exchange rate (GBP/USD) remained volatile over the past week, as a mix of Brexit jitters and US-China tensions caused instability.
The US and China were able to come to a temporary truce, with the leaders of the two countries agreeing not to increase tariffs for 90 days.
The pause in hostilities was negotiated over dinner at the G20 summit at the weekend with a statement from the White House reading:
‘If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%.’
Despite this, even as investors are pulling out of the US Dollar safe-haven, the Pound has still managed to sink as a result of Brexit fuelled anxieties, with GBP falling by almost 0.7% to its lowest levels against USD since October.
Last week: GBP/USD Exchange Rate Plummets Following Carney’s Warning
Fears over what would happen to the UK if a no-deal Brexit were to be forced upon the country were heightened in last week’s session as Bank of England (BoE) Governor, Mark Carney warned that the economy would shrink by 8% in the immediate aftermath if there was no transition period.
The US Dollar dropped against Sterling in wake of a dovish speech by US Chair of the Federal Reserve, Jerome Powell in which he signalled the Fed’s monetary policy tightening cycle could slow down next year.
Higher-than-expected continuing jobless claims in the US showed an increase to 1.71 million while the initial jobless claims increasing to 234,000 despite a predicted decrease allowed the Pound to push back slightly.
Despite this disappointing data from the USA, the Pound was unable to claw back losses at the end of the week’s session as a better-than-expected figure for the Chicago purchasing managers’ index of 66.4, despite a predicted decrease, bolstered USD.
GBP/USD Exchange Rate Forecast: Further Volatility in the Pairing Likely as Parliament Vote Approaches
Looking ahead to the remainder of this week’s session, the Pound US Dollar (GBP/USD) exchange rate is likely to remain volatile, as Brexit remains centre-stage for movement within the pairing, with Danske Bank currency strategist, Morten Helt noting:
‘Until the British Parliament votes on the deal next week, we are going to see a steady drumbeat of Brexit headlines, which is going to keep the Pound weak.’
Tuesday will see the UK construction PMI released for for November, and if it is set to decrease as forecast, it seems likely that the Pound will struggle to fend off the advances of the US Dollar.
Speeches by the BoE on Tuesday and the Fed on Wednesday are likely to cause movement within the pairing, especially if the banks present themselves in a bullish manner.
Average hourly earnings in the US is to be released on Friday, with the rate set to remain steady at 3.1% compared to last November, and if there are any unexpected changes it seems likely that the US dollar will see movement as the week’s session draws to a close.