Approval for General Election Stabilises Pound US Dollar (GBP/USD) Exchange Rate
With Boris Johnson’s proposed general election looking set to get through parliament the Pound Sterling to US Dollar (GBP/USD) exchange rate steadied.
News that Labour MPs would now back the motion for an early election, as the party’s condition of removing a no-deal Brexit from the table has reportedly ‘been met’, gave Pound Sterling (GBP) a boost.
Although the UK appears on course for further weeks of political turmoil and uncertainty this development failed to weigh down GBP exchange rates.
Even so, the upside potential of the Pound still proved relatively limited thanks to an underwhelming UK consumer credit report.
As growth in consumer credit dipped to a five-year low this raised fresh concerns over the economic outlook, with lower levels of consumer confidence likely to drag on growth.
US Dollar Exchange Rates Stall Ahead of Federal Reserve Interest Rate Announcement
Mounting anticipation ahead of the Federal Reserve’s October policy announcement kept the US Dollar (USD) on the back foot, meanwhile.
With markets widely expecting Fed policymakers to deliver a fresh interest rate cut support for USD exchange rates proved limited, even though the impact of a cut had already been largely priced in.
However, the US Dollar could find a temporary rallying point on the back of the latest consumer confidence index.
Forecasts point towards the index picking up from 125.1 to 128.0 on the month, suggesting a greater level of resilience among US consumers.
Evidence that ongoing trade tensions with China have had a more limited impact on domestic sentiment would ease worries over the health of the upcoming gross domestic product data, benefitting the US Dollar.
Third Quarter US Growth Slowdown Forecast to Limit US Dollar Support
Fresh losses could also be in store for USD exchange rates on the back of Wednesday’s third quarter gross domestic product report.
As the quarterly growth rate is expected to ease from 2.0% to 1.7% this could undermine confidence in the outlook of the world’s largest economy.
In spite of recent signs of progress towards a US-China trade agreement the US economy remains at risk of a sustained slowdown in trade and industrial sector activity.
If the Fed delivers its much-anticipated interest rate cut with a dovish message this is likely to put additional pressure on USD exchange rates.
The risk of the Fed continuing to cut interest rates in the months ahead may offer the GBP/USD exchange rate a solid leg up.
Weakening Consumer Confidence Set to Drag on Pound Sterling
A deteriorating GfK UK consumer confidence index could see GBP exchange rates stumble once again, however.
As the index looks set to dip from -12 to -13 on the month this would offer fresh evidence of the detrimental impact that ongoing Brexit-based anxiety is having on the UK economy.
With the latest extension of the Brexit deadline likely to results in three more months of uncertainty confidence appears at risk of declining further before the end of the year.
As the UK gears up for another general election the GBP/USD exchange rate may struggle to hold onto any positive footing for long.