GBP/USD Exchange Rate Buoyed as Trade Tensions Ease
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate remains buoyed this afternoon as Theresa May has said she will discuss the ‘legal assurances’ sought be MPs on the Irish backstop at an EU summit of leaders in Brussels later this evening.
Meanwhile the US Dollar is struggling to find momentum today as demand in the safe-haven currency is clipped by easing trade tensions between the US and China.
GBP/USD Exchange Rate Strengthens as May Heads to Brussels
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending higher this morning as Theresa May heads to Brussels to discuss the Irish backstop with her EU peers.
At the time of writing the GBP/USD exchange rate is up around 0.3% this morning, pushing the pairing away from a 20-month low but still half a cent down on the week so far.
Pound US Dollar (GBP/USD) Exchange Rate Climbs ahead of EU Summit
The Pound US Dollar (GBP/USD) exchange rate has risen this morning as Theresa May travels to Brussels for the latest EU summit of leaders.
Her trip comes just a few hours after she survived a vote of no-confidence, which prompted Sterling to jump on Wednesday.
GBP investors appear to be cautiously optimistic this morning on hopes that the PM may be able to secure greater assurances on the Irish backstop from her EU counterparts.
However, not all observers are convinced, with some suggesting May is unlikely to secure anything legally binding at the trip and forecasting further volatility in the Pound in the weeks to come.
Analysts at Danske Bank explain:
‘Things are basically unchanged from the day before yesterday and focus now turns to the EU summit, where EU leaders will discuss Brexit today.
‘There is still no majority for anything in the House of Commons and the question is whether Theresa May can get sufficient assurances in order to change some MPs’ stance on the Brexit deal.
‘As such, all options still are on the table, including a second referendum and the risk of the deal not being passed in the House of Commons remains intact.’
US Dollar (USD) Exchange Rates Muted Following Slowdown in Inflation
At the same time, the US Dollar (USD) is on the defensive this morning, following the release of the latest US CPI figures yesterday afternoon.
Wednesday’s data revealed US headline inflation slowed from 2.5% to 2.2% in November, a nine-month low.
This slowdown in inflation appeared to be mostly driven by a fall in fuel prices, and while underlying inflation accelerated last month, some analysts still suggested the data may still strengthen the case for the Federal Reserve to pause interest rates next year.
US November #inflation numbers: Both headline and core now at 2.2%, with headline likely to ease somewhat in the coming months. Fed hike in December, then a 'data dependent' pause most likely scenario. pic.twitter.com/Lg5x3wE0Kj
— jeroen blokland (@jsblokland) December 12, 2018
GBP/USD Exchange Rate Forecast: Slowing US Retail Sales to Weak US Dollar?
Looking ahead, the Pound US Dollar (GBP/USD) exchange rate may continue to strengthen on Friday following the publication of the latest US retail data.
Economists currently forecast retail sales growth will have slowed 0.8% to 0.2% last month, likely adding to further concerns regarding the Fed’s policy outlook and weakening the US Dollar.
Meanwhile movement in the Pound is likely to remain dominated by Brexit and UK politics, with Sterling likely to remain volatile while uncertainty continues to hang over the UK currency.