GBP/USD Exchange Rate Slides as UK Political Turmoil Weighs
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate was close to striking its worst levels so far this year, with the pairing falling as low as $1.2558 as political uncertainty in the UK continues to drag on Sterling sentiment.
At the same time investors continued to flock to the US Dollar as it was buoyed by slightly stronger-than-expected US data as well as nervous investors who sought shelter in the safe-haven currency as the US launched a new trade war against Mexico.
GBP/USD Exchange Rate Steady Following Trump Tariff Announcement
The Pound Sterling to US Dollar (GBP/USD) exchange rate is rangebound this morning as markets digest Donald Trump’s shock tariff announcement.
At the time of writing this morning the GBP/USD exchange rate is virtually unchanged, leaving the pairing trading at around $1.2626.
US Dollar (USD) Muted as Trump Imposes Tariffs on Mexico in Immigration Row
The US Dollar (USD) has found itself trading in a narrow range against the Pound (GBP) this morning, following the news that Trump has imposed a tariff on all Mexican exports entering the US in a bid to curb illegal immigration.
On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..
— Donald J. Trump (@realDonaldTrump) May 30, 2019
The announcement came asa major shock to markets, especially as it came on the same day that the White House spoke of plans to pursue a new trade deal with both Mexico and Canada.
While another rise in global trade tensions would normally bolster the appeal of the US Dollar thanks to its safe-haven status, the Mexico tariffs have spooked some USD investors as analysts express concern over the impact of US companies operating in the country, particularly the Automotive industry where part flow is extremely important.
Pound (GBP) Flat Following Surprise Slide in UK House Prices
Meanwhile, the Pound (GBP) is once again struggling to find momentum this morning as political jitters continue to stifle demand.
Also limiting the appeal of Sterling today are figures showing that UK house prices unexpectedly slumped last month.
According to data published by Nationwide, house price growth contracted 0.2% in May after previously expanding 0.3% in April.
This has left prices stuck around the same level for roughly a year, a trend analysts expect to continue over the coming months as Brexit uncertainty continues to weigh on the UK housing market.
Howard Archer, chief economic advisor to the EY Item Club said:
‘We believe with Brexit being delayed until 31 October – and it currently very unclear what will happen then – and the domestic UK political situation volatile, prolonged uncertainty will weigh down on the economy and hamper the housing market.’
GBP/USD Exchange Rate Forecast: Sterling to Struggle on Subdued PMI Figures?
Looking ahead to next week, the Pound to US Dollar (GBP/USD) exchange rate may drift lower again through the first half of the session as the UK publishes its latest PMI figures.
These are expected to report that the UK’s private sector remained close to stagnation in May, likely raising concerns over the country’s growth potential in the second quarter.
Meanwhile, the US PMI figures could also give USD investors some pause for thought on Monday, with manufacturing growth expected to have remained relatively weak in May.
However it’s likely to be the release of the latest US non-farm payroll figures at the tail end of the session that have the greatest impact on the US Dollar next week, with a slide in employment growth and an uptick in unemployment potentially limiting the appeal of the ‘Greenback’.