Lower Level of Government Borrowing Unable to Shore up Pound Sterling US Dollar (GBP/USD) Exchange Rate
The mood towards Pound Sterling (GBP) failed to improve this morning in spite of May’s UK public sector net borrowing data bettering forecasts.
While the level of new government debt proved smaller than anticipated, clocking in at 4.46 billion rather than 5.10 billion, this was not enough to shore up GBP exchange rates.
Anxiety over Brexit continued to hang over the economic outlook ahead of the weekend, with investors still factoring in high odds of a potential no-deal scenario.
As the Conservative leadership contest was cut down to its final two candidates the Pound Sterling to US Dollar (GBP/USD) exchange rate was left on a weaker footing, given that Boris Johnson remains the clear frontrunner.
Weaker Business Outlook Fails to Keep US Dollar (USD) Under Pressure for Long
Yesterday’s lacklustre Philadelphia Fed business outlook index weighed heavily on the US Dollar (USD), meanwhile.
As the index plunged sharply from 16.6 to just 0.3 this raised fresh concerns over the health of the economic outlook, suggesting that trade tensions have dented domestic sentiment.
Even so, this was not enough to prevent the GBP/USD exchange rate trending lower today as the general sense of market risk aversion picked up.
With political tensions between the US and Iran continuing to escalate the US Dollar benefitted from its status as a safe-haven currency, recovering some of the week’s losses.
USD Exchange Rates Look for Gains on Home Sales Rebound
Demand for the US Dollar could pick up further this afternoon if May’s existing home sales figures improve as forecast.
Fresh signs of resilience within the US housing market would give investors greater cause for confidence in the wider economic outlook.
June’s manufacturing and services PMIs may also help to shore up USD exchange rates ahead of the weekend, with markets hoping to see a modest uptick in sector activity on the month.
While even positive data is unlikely to alter the current odds of the Federal Reserve cutting interest rates imminently this may still give the US Dollar a boost in the short term.
Stronger Retail Sales Indication May Boost Pound Sterling (GBP)
Political speculation looks set to dominate the mood towards Pound Sterling as the race to succeed Theresa May as Conservative leader approaches its conclusion.
Further GBP exchange rate weakness could also come on the back of the latest CBI reported retail sales index, with investors anticipating another negative reading.
Unless markets see signs of recovery within the retail sector, indicating greater confidence among consumers, the potential for a Pound rally appears limited.
On the other hand, a continued deterioration could drag the GBP/USD exchange rate further back from its recent highs.