Pound US Dollar (GBP/USD) Exchange Rate Gets off to a Rocky Start in 2019
The Pound US Dollar (GBP/USD) exchange rate was hit by some turbulence at the start of the year due to a combination of thin trade and some optimistic-sounding comments from UK officials about Brexit.
USD initially weakened against GBP throughout the first half of last week’s session as the ongoing US government shutdown caused anxiety for investors.
Midweek saw a turnaround for the US Dollar’s fortunes, however, when a shock contraction in China’s manufacturing sector last month saw currency investors flee to safe havens.
Wednesday also saw more volatility when – in thin trade – a likely algorithm-driven mini flash crash saw currency pairings spike, further unnerving investors.
Nevertheless the USD/GBP exchange rate was unable to hold onto its gains as a sharp slowdown in the latest US manufacturing PMI pulled sentiment lower on Thursday.
This was not helped by Fed Chair Jerome Powell, who issued some dovish remarks about the US economy, leading investors to wonder whether he may be considering a rate pause this year.
A strong US jobs report on Friday did little to help USD back onto its feet.
GBP under Pressure as Car Sales Stall and Parliament Reconvenes to discuss Brexit
This week the Pound (GBP) has risen against the US Dollar, and is currently up around 0.3% on the inter-bank exchange rate.
This is despite some less-than-impressive new car sales figures coming out this morning, which revealed that new registrations continued to slump in 2018, with figures falling 5.5% in December compared with a year earlier.
The fall represents the second consecutive year of falling vehicle registrations in the UK, with some analysts quick to blame ‘Brexit uncertainty’ as the leading cause.
Other than this figure, there is no other UK data of note coming out today, or for the next few days, although investors will likely be focused on the latest Brexit twists and turns as Parliament reconvenes after the Christmas and New Year recess.
GBP/USD Exchange Rate Forecast: Brexit Uncertainty likely to Impact Sterling over Next Week
Looking ahead, the Pound US dollar (GBP/USD) exchange rate is likely to trade in a wide range this week as Brexit moves back into the limelight after the Christmas parliamentary recess.
As MPs return, the House of Commons will be dominated by a debate on the EU withdrawal bill ahead of a key vote on Theresa May’s Brexit deal next week.
As it appears that a majority of MPs are still set to reject May’s deal, we are likely to see Sterling buffeted about by Brexit-related headlines as the clock runs down towards a ‘no-deal’ scenario.
Nevertheless, there could be some relief for the Pound on Friday when the UK’s latest trade and GDP figures are released, with the GBP/USD exchange rate potentially strengthening if the data impresses.
Before then, we will see the release of November’s Halifax house prices, with current expectation being that there will have been a slight rebound in prices – something that would likely be beneficial for Sterling.
On the other side of the pond, we will see the latest FOMC meeting minutes released on Wednesday, with investors scouring the report for hints as to whether the Fed’s outlook will be as dovish as its governor hinted at last week. Any such evidence that it is will likely send GBP/USD sharply higher.