Pound US Dollar (GBP/USD) Exchange Rate Softens as EU Weighs up Brexit Deadline Extension
As markets await word on the likely extension of the Brexit deadline the Pound Sterling to US Dollar (GBP/USD) exchange rate remained on the back foot.
While EU leaders are widely expected to grant a fresh extension the question of its likely length remains up in the air, keeping a degree of uncertainty hanging over the UK outlook.
The rising odds of an imminent general election also left Pound Sterling (GBP) under pressure this morning, in spite of reports of a growing cabinet rift over the matter.
With political disruption looking set to continue for the foreseeable future investors saw little incentive to favour the Pound over its rivals, especially given recent signs of an economic slowdown.
A weaker-than-expected uptick in the latest BBA mortgage approvals report also limited the potential for GBP exchange rate gains.
USD Exchange Rates Shake off Market Risk Appetite
Although positive comments from US and Chinese officials helped to shore up market risk appetite earlier in the week this failed to weigh down the US Dollar (USD) for long.
Growing anxiety over the health of the global economy encouraged investors to pile back into the safe-haven US Dollar, pushing the GBP/USD exchange rate further from its recent highs.
However, the mood of USD exchange rates could sour this afternoon with the release of September’s durable goods orders data.
As forecasts point towards a -0.8% fall in orders on the month this could dent confidence in the underlying strength of the US economy, leaving the US Dollar exposed to selling pressure.
Unless consumers show signs of resilience, driving a monthly increase in durable goods orders, USD exchange rates may struggle to gain fresh ground in the near term.
Further US Dollar Gains Forecast on Solid Consumer Sentiment Reading
Even so, confirmation of a solid uptick in October’s University of Michigan consumer sentiment index may still offer a boost to the US Dollar ahead of the weekend.
Evidence of greater optimism among US consumers, even as spending activity weakens, would offer investors some cause for confidence.
Fresh commentary from Federal Reserve policymakers could put a dampener on any US Dollar upside, though.
As long as markets see the odds of an imminent interest rate cut as a near-certainty USD exchange rates may struggle to find much headroom.
Lack of Political Certainty Set to Weigh on GBP/USD Exchange Rate
The latest political developments in the UK still look set to dominate the direction of the GBP/USD exchange rate in the days ahead, though.
Confirmation of a new Brexit deadline could offer the Pound a temporary rallying point, with investors likely to greet any sense of certainty on the issue.
However, GBP exchange rates are likely to experience fresh volatility once it becomes clear when the UK will head back to the polls.
Until the matter of the withdrawal agreement is settled the Pound remains vulnerable to further bouts of weakness, limiting the likelihood of future GBP/USD exchange rate gains.