GBP/USD Exchange Rate Accelerates Ahead of Johnsons Cabinet Announcement
The Pound Sterling to US Dollar (GBP/USD) exchange rate is unexpectedly trending higher this morning, with some GBP buying taking place in spite of the uncertainty posed by the appointment of key cabinet positions by Boris Johnson later today.
At the time of writing the GBP/USD exchange rate is up almost 0.5% so far this morning with the pairing trading at around $1.2496.
Will Johnson’s Cabinet Picks Upset the Pound (GBP)?
Whilst the Pound (GBP) is currently on the front foot this morning, the UK currency appears to lack any real follow through as markets brace for Boris Johnson to officially take over as Prime Minister later this afternoon.
Shortly after being appointed by the Queen, Johnson is expected to address the nation outside Downing Street in which he is expected to outline some of his domestic policy agenda.
However the real focus may be on Johnson’s key cabinet appointments expected later this evening, with the Pound potentially weakening if he chooses to surround himself with fellow Brexiteers who may support his plans for a potential no-deal Brexit.
The focus will not solely be on Brexit, with GBP investors also looking out for what the new cabinet may mean for the wider economic policy outlook of the government.
Analysts at Deutsche Bank note:
‘Indications are that Borisnomics may represent a significant relaxing of fiscal policy leading to materially higher borrowing and hence issuance. At the same time, we think there is at least some possibility the Bank of England’s mandate could be adapted to provide the bank more flexibility over inflation.’
Johnson remains a wildcard for many GBP investors so expect to see Sterling remain highly sensitive to political headlines through the remainder of the week.
US Dollar (USD) Buoyed by US-China Trade Optimism
Meanwhile, while the US Dollar (USD) may be on the defensive against the Pound (GBP), the ‘Greenback’ remains robust in wider trade.
This appears mostly driven by the announcement that high-level trade talks between the US and China will resume next week for the first time since May.
US officials prepare to visit China for trade talks https://t.co/b65mtN3TcD
— FT China (@ftchina) July 23, 2019
With the Federal Reserve previously citing rising trade tensions as a potential driving factor behind the need for monetary easing, optimism that relations are improving again may help to further temper Fed rate cut expectations, further supporting the US Dollar.
GBP/USD Exchange Rate Forecast: US Dollar to Rally as Durable Goods Rally?
On the data front the Pound to US Dollar (GBP/USD) exchange rate looks set to weaken tomorrow with the publication of the latest US durable goods figures.
Economists forecast that goods order growth will have rebounded from -1.7% to 0.7% in June, likely helping the US Dollar to accelerate.
At the same time, while political developments are likely to remain the main catalyst of movement in the Pound through to the end of the week, we may see if the Confederation of British Industry’s (CBI) Distributive trends index place some pressure on the Pound tomorrow if domestic retail activity remained gloomy this month.