GBP/USD Exchange Rate Subdued Amidst Brexit Worries
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading in a narrow range this morning as ongoing Brexit fears continue to weigh on sentiment.
At the time of writing the GBP/USD exchange rate is trading at $1.2559 this morning, with the pairing virtually unchanged from this morning’s opening rate.
Pound (GBP) Consolidates Gains, but Political Uncertainty Continues to Loom
After rallying against the US Dollar (USD) in the latter half of last week’s session, the Pound (GBP) appears to be consolidating its position this morning, in the face of continued political uncertainty in the UK.
Despite facing growing criticism over the past week, Boris Johnson is still seen as the frontrunner to become Prime Minister later this month.
The prospect of a Johnson premiership continues to unnerve many GBP investors, with the risks of a no-deal Brexit seen as far greater under his leadership.
This has fueled the Pounds losses over the last couple of months, with the GBP/USD exchange rate having falling roughly two cents since Theresa May announced that she would be stepping down as PM at the end of May.
Fed Rate Cut Expectations Continue to Drag on the US Dollar (USD)
At the same time, the US Dollar (USD) remains subdued at the start of this week’s session due to rising expectations that the Federal Reserve will ease it monetary policy this year.
Adding further fuel to speculation were comments from Chicago Fed President Charles Evans on Friday, in which the voting member of the Fed’s rate setting committee suggested that up to two cuts would be needed this year to keep inflation within the bank’s 2% target.
Evan said:
‘Inflation expectations seem to me to be anchored a little bit below a level consistent with our two percent objective, and it has been stubborn like that.
‘That tells me our current setting for policy is a little bit on the restrictive side…I need a couple of rate cuts…in order to get the inflation outlook up.’
The Federal Open Market Committee (FOMC) will meet later this month, where it is widely expected to implement its first rate cut in over a decade.
GBP/USD Exchange Rate Forecast: Will a Rise in Wage Growth Lift Sterling?
Looking to the week ahead, we may see the Pound to US Dollar (GBP/USD) exchange rate move higher on Tuesday, with the publication of the UK’s latest employment figures.
Whilst unemployment is expected to have remained unchanged at a 44-year low of 3.8%, economists forecast that wage growth picked back up in May, something which may held Sterling to extend its recent recovery.
However, with growing evidence that the Bank of England’s (BoE) next policy move will likely be a rate cut rather than a hike, any upside in Sterling may prove limited.
Meanwhile, we may see the US Dollar stumble tomorrow afternoon, following the release of the latest US retail sales figures as analysts predict that sales growth will have slowed again in June.