Pound to US Dollar (GBP/USD) Exchange Rate Falls as US Dollar Rebounds from Losses
Investors bought the US Dollar (USD) back from its worst levels yesterday despite some underwhelming US data, while the Pound Sterling to US Dollar (GBP/USD) exchange rate tumbled. Sterling (GBP) losses were deepened by rising Brexit fears.
Since opening this week at the level of $1.26, GBP/USD has seen strong gains. Yesterday, The GBP/USD rate touched on a weekly high of $1.27, but the pair has since slipped back from those highs.
At the time of writing on Thursday, GBP/USD was still trending around half a cent higher than the week’s opening levels.
The US Dollar has seen notable losses this week overall, as investors ramp up bets that the Federal Reserve will cut interest rates at some point over the next year. The Pound remains unappealing as fears of a no-deal Brexit return.
Pound (GBP) Exchange Rates Expected to Fall Further if No-Deal Brexit Happens
With UK Prime Minister Theresa May set to step down from her leadership role over the next month and her successor looking likely to be one who supports a harder Brexit, no-deal exit fears have returned and the Pound (GBP) has suffered as a result.
While GBP/USD has rebounded slightly from its worst levels this week amid broad weakness in the US Dollar (USD), the British currency’s appeal is still being limited by weakness in the UK economy.
This week’s May PMI stats from Markit showed that manufacturing and construction had unexpectedly contracted, although the services sector did strengthen a little more than forecast.
However, today the Pound began to slide once again as a fresh poll showed economists believed the British currency would see significant losses in the event of a no-deal Brexit.
US Dollar (USD) Exchange Rates Rebound from Lows in Profit Taking Moves
The US Dollar (USD) has put in a weaker performance since last week, when Donald Trump amped up his tariffs rhetoric and US data continued to indicate that the economy may be slowing.
As officials from the Federal Reserve, including Fed Chairman Jerome Powell, have signalled that the bank may consider cutting interest rates, the US Dollar has been falling for most of the week.
Although investors are still betting the Federal Reserve will cut interest rates at some point over the next year, the US Dollar has rebounded slightly since last night in profit taking.
USD also benefitted from hopes that the US would be able to reach a deal on trade with Mexico, despite a lack of reported progress in talks so far.
Stronger-than-expected US non-manufacturing data from ISM has also supported the US Dollar since yesterday afternoon.
Pound to US Dollar (USD) Exchange Rate Traders Await Non-Farm Payroll Stats
While the Pound to US Dollar (GBP/USD) exchange rate is falling from its weekly highs today, the pair may still be in for gains this week if tomorrow’s US data disappoints.
Some notable stats due for publication later today include US trade balance figures and Non-Farm Productivity stats, but investors may be hesitant to move too much on GBP/USD ahead of tomorrow’s anticipated data when we will see the publication of US Non-Farm Payroll results from May.
As these US job stats are regarded as important and often influence the Federal Reserve’s monetary policy, the data could cause a shift in US Dollar (USD) movement if it surprises investors.
If the US job market was weaker in May than expected, markets are even more likely to bet that the Federal Reserve will cut interest rates. This would lead to some further late-week losses for USD.
The Pound to US Dollar (GBP/USD) exchange rate will also continue to be influenced by any developments in Brexit or UK politics that influence the Pound (GBP).