Pound Sterling to US Dollar (GBP/USD) Exchange Rate Lacks Support as US Growth Accelerates

Solid US Growth Keeps Pound US Dollar (GBP/USD) Exchange Rate Under Pressure

Confirmation that the annualised US gross domestic product had accelerated to 3.1% left the Pound Sterling to US Dollar (GBP/USD) exchange rate on a narrow trend today.

However, after an underwhelming performance from yesterday’s durable goods orders and advance goods trade balance the US Dollar (USD) remained on a largely weaker footing.

Investors were not impressed by these underlying signs of weakness within the US economy, which offer fresh evidence of the negative impact the Trump administration’s trade rhetoric is having on growth.

With hopes for the upcoming G20 summit fading in the face of fresh Twitter attacks against Japan and India the upside potential of USD exchange rates appears limited.

Although Chinese officials have adopted a more conciliatory tone on trade if the two sides fail to make any tangible progress towards ending their trade spat this could see the US Dollar slide further.

Anxiety over Brexit Weighs on GBP Exchange Rates

Demand for Pound Sterling (GBP) remained generally muted, meanwhile, as markets continued to weigh up the odds of a potential no-deal Brexit.

With Conservative leadership contest frontrunner Boris Johnson apparently prepared to bypass Parliament on Brexit the risk of the UK crashing out of the EU in October without a deal has increased.

In the absence of any real sense of political clarity GBP exchange rates struggled to find traction especially in the wake of the Bank of England’s (BoE) dovish shift last week.

Although Japanese officials urged the UK to avoid a no-deal scenario, alongside fresh warnings from the automobile sector, the odds of a disruptive exit remain higher than markets would like.

Pound Sterling (GBP) Vulnerable to Deteriorating Consumer Confidence

GBP exchange rates could come under further pressure overnight if the GfK consumer confidence index eases on the month as forecast.

If the index dips from -10 to -11 this would signal a continued deterioration in domestic sentiment, likely in response to the ongoing political uncertainty dominating the headlines.

Lower levels of consumer confidence are likely to translate in weaker spending, something which could drag on the second quarter gross domestic product.

Unless sentiment surprises to the upside with a solid improvement the Pound looks set to stay under pressure heading into the weekend.

Steady Inflation Set to Offer Limited Support to US Dollar (USD)

With no change anticipated from May’s US personal consumption expenditure core reading the potential for a US Dollar rally appears limited tomorrow.

Even if the Federal Reserve’s preferred measure of inflation picks up on the year, however, this may not be enough to curb bets that an interest rate cut is imminent.

The mood of USD exchange rates could sour further, though, on the back of June’s Chicago purchasing managers index.

Fresh evidence of weakness within the US manufacturing sector would leave the US Dollar exposed to the downside, offering the GBP/USD exchange rate a leg up.

Louisa Heath

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