Pound to US Dollar Exchange Rate Sliding Further from Highs after UK Inflation Report
While Pound (GBP) investors have been focused more on UK election speculation than domestic data this week, the Pound Sterling to US Dollar (GBP/USD) exchange rate’s appeal has been dampened by the latest data regardless.
Since opening this week at the interbank level of 1.27, GBP/USD has advanced over half a cent.
GBP/USD touched on a weekly high on Monday, but even this was well below last week’s opening levels of 1.29. Still, at the time of writing on Wednesday, GBP/USD is trending near the interbank level of 1.28.
Investors have been hesitant to buy the Pound too much amid election jitters and poor UK data. However the US Dollar’s (USD) demand has been limited too, amid fresh doubts over US-China trade relations.
Pound (GBP) Exchange Rates Fail to Find Support as Inflation Misses the Mark
For most of the week so far, the Pound (GBP) has been supported by speculation that Britain’s ruling Conservative Party will be able to win a majority at next month’s UK General Election. This would help the party to pass its relatively soft Brexit plan.
In recent sessions, the populist Brexit Party has indicated that it will not stand candidates in seats won by Conservative MPs at the previous election. This essentially amounted to an election pact that could prevent the Brexit Party from biting out of the Conservative vote.
The Pound’s gains in reaction to the news has been limited though, amid mixed views on whether or not it will actually impact the election outcome.
As a result of the focus on election uncertainties though, Pound investors have been largely brushing over the latest UK ecostats.
The Pound has failed to find fresh support as today’s inflation stats fell short, but the data is not impacting the currency in a considerably negative way either.
Latest @ONS inflation data – the slowdown of the past few months has continued. Annual CPIH inflation was 1.5% in October (down from 1.7%). Inflation is now running at the slowest pace since the devaluation in sterling pushed up inflation following the EU referendum in 2016. pic.twitter.com/97PMOmLU2S
— ResolutionFoundation (@resfoundation) November 13, 2019
US Dollar (USD) Exchange Rates Run Out of Steam as Trump Comments Hurt US-China Hopes
Last week saw a surge in US Dollar (USD) demand, as the currency benefitted from rising hopes that the US and China were closing in on a preliminary trade deal.
Due to the US-China trade war’s impact on the US economy, the US Dollar advanced on these hopes, and remained relatively sturdy earlier this week.
However, yesterday’s trade speech from US President Donald Trump saw fresh comments that weighed on market optimism about the possibility of a deal.
The US President said that a phase one trade deal could be completed ‘soon’, but also indicated that China had ‘cheated’ in trade.
His comments were seen as having the potential to break the recently more optimistic diplomatic relations between the US and China. This weakened market hopes for an imminent trade deal, and weighed on the US Dollar.
Pound to US Dollar (GBP/USD) Exchange Rate Investors Await Fresh Fed Speculation
Most of this week’s key UK data has been published already, and has had a largely muted impact on Pound (GBP) exchange rates. As a result, unless tomorrow’s upcoming retail sales stats are highly surprising, investors may brush over these as well.
Instead, Pound to US Dollar (GBP/USD) exchange rate investors will remain focused on UK politics and election speculation, as well as upcoming US data and Federal Reserve news.
The most notable ecostats due in the coming days will be this afternoon’s US inflation rate, and Friday’s US retail sales results.
These datasets could influence Federal Reserve interest rate cut bets if they surprise markets. Investors are already speculating that the Fed is becoming more dovish, so weak data could boost rate cut bets and lead to fresh US Dollar (USD) losses.
Fed speculation will also be influenced by an upcoming Congressional testimony from Fed Chairman Jerome Powell, due to be held from today through tomorrow.
Overall, Pound to US Dollar (GBP/USD) exchange rate movement will be driven by UK election developments and shifts in Federal Reserve speculation.