GBP/USD Exchange Rate Softens as Cross-Party Talks Implode
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at its lowest levels since January this morning as the imminent collapse of cross-party Brexit talks adds to Sterling’s woes.
At the time of writing the GBP/USD exchange rate is trading at a four-month low at $1.2782 and remains just below the day’s opening rates.
Pound (GBP) Extends Losses as Brexit Pessimism Rises
The Pound (GBP) remains on the back foot against the US Dollar (USD) and the majority of its other peers this morning as political uncertainty in the UK heats up once again.
Following on from yesterday’s announcement that Theresa May will set a timetable in early June for her departure, markets are today reacting to the news that the cross-party talks on Brexit will come to a close without a deal being agreed.
This will come as a major disappointment to investors as, coupled with May’s likely departure within the next couple of weeks, the risks of a no-deal Brexit look to be on the rise once again.
Jasper Lawler, Head of Research and Education at London Capital Group suggests:
‘Given the Tories’ sharp losses in the polls and the Brexit party’s dominance in polling for European elections, a hard-line Brexiteer Prime Minister is becoming more likely. The overriding fear for currency traders is that this means that a hard no-deal Brexit is back on the table as an option.’
US Dollar (USD) Rises as US-China Trade Talks in Jeopardy
Meanwhile, the US Dollar (USD) continues to enjoy support this morning as safe-haven demand remains buoyed by US-China trade tensions.
While trade talks are still ongoing, lending some hope that a deal could still be reached between the two powers, this optimism is fading fast after Chinese state media suggested Beijing is no longer interested in a dialogue with Washington.
This comes hot on the heels of Donald Trump’s move to effectively bar Chinese Telecoms giant Huawei from doing business with US companies.
GBP/USD Exchange Rate Forecast: How Might the EU Elections Impact Sterling?
Looking ahead to next week, the Pound to US Dollar (GBP/USD) exchange rate could find itself left on the defensive again as markets brace for the upcoming EU elections.
Taking place in the UK on 23 May, the elections are viewed by some as a proxy for a second referendum on Brexit itself.
This could prove to be a major drag on Sterling sentiment next week as current polls suggest the Brexit party will emerge as the big winners.
However in the lead up to the vote, markets might find some upside to the Pound with the release of the UK’s latest CPI figures, which are expected to show inflation moved back into the Bank of England’s target range in April.
Meanwhile, movement in USD exchange rates will probably remain dominated by trade sentiment next week, with the US Dollar likely to remain in a position of strength if trade jitters persist.
Outside of this there will be the release of the US durable goods orders at the tail end of the session, which could clip demand for the ‘Greenback’ and allow the Pound US Dollar (GBP/USD) exchange rate to rise.