GBP/USD Exchange Rate Muted as UK Politics in Focus
The Pound Sterling to US Dollar (GBP/USD) exchange rate is struggling to find momentum this morning as heightened political uncertainty in the UK drags on sentiment.
At the time of writing the GBP/USD exchange rate is trading at $1.2737 this morning, virtually unchanged from its opening levels, but down from the two-week high struck at the start of the European session.
Pound (GBP) Subdued amid Heightened Political Uncertainty
The Pound (GBP) is rangebound against the US Dollar (USD) this morning as UK political uncertainty continues to be a dampener on Sterling.
This uncertainty has been heightened at the start of this week’s session as Boris Johnson –who was previously seen as a dead-cert to replace Theresa May as PM- has found his campaign derailed by reports of a row with his girlfriend that resulted in the police being called, casting greater uncertainty over the Conservative leadership contest.
Boris Johnson: Police called to Tory leadership contender's home https://t.co/60WievXXtP
— BBC Politics (@BBCPolitics) June 21, 2019
However at the same time Johnson still remains the frontrunner, something that GBP investors fear increases the risks of a no-deal Brexit and limits the chances of markets making any bullish bets on the Pound for the foreseeable future.
US Dollar (USD) Sell-Off Persists on US-China Trade Optimism
Meanwhile, last week’s sell-off of the US Dollar (USD) appears to have carried through into this week’s session, with the ‘Greenback’ softening against the majority of its other peers this morning.
This prevailing selling bias in the US Dollar comes in the wake of the Federal Reserve’s policy decision on Wednesday, where a dovish shift from the bank has USD investors pricing in a potential rate cut next month.
Further limiting the appeal of the US Dollar this morning is also the sense of optimism ahead of this weekend’s G20 summit, where it is hoped that US-China trade talks could be restarted at a meeting of US President Donald Trump and his Chinese counterpart Xi Jinping.
GBP/USD Exchange Rate Forecast: Will Powell Offer a Clearer Message on Monetary Policy?
Looking ahead, the main catalyst of movement in the Pound to US Dollar (GBP/USD) exchange rate on Tuesday is likely to be a speech by Fed Chair Jerome Powell.
Given the topic is ‘Economic outlook and monetary policy’ it’s seems fair to expect for him to touch on the Fed’s rate plans, with USD exchanges rates likely to tumble if Powell drops more hints that the US central bank could be targeting a rate cut in July.
In the meantime, the Pound could face some pressure tomorrow morning with the release of the Confederation of British Industry’s (CBI) distributive trades index, with economists forecasting that retail activity in the UK will have remained weak in June.