Key Data Ahead for Pound to US Dollar (GBP/USD) as Exchange Rate Near January Lows Once Again

Pound to US Dollar Exchange Rate Slides as US Ecostats Support USD Outlook

The Pound (GBP) ultimately failed to sustain a recovery last week, and the Pound to US Dollar (GBP/USD) exchange rate ended the week around half a cent lower. The pair continues to tumble this morning.

GBP/USD opened last week at the interbank level of 1.30, and spent most of the week trending lower.

While GBP/USD made a recovery attempt that briefly took it above the level of 1.31 towards the end of the week, the pair ultimately closed the week lower due to strong US data.

GBP/USD has continued to slide since markets opened this morning. As of the time of writing, GBP/USD has lost almost all of the recovery it saw in the second half of last week. The pair is currently trending lower in the interbank region of 1.29.

This put the Pound to US Dollar exchange rate just above last week’s lowest January levels.

Pound (GBP) Exchange Rates Remain Under Pressure on BoE Bets and Brexit Concerns

The Pound (GBP) fell at the end of last week as Bank of England (BoE) interest rate cut bets continued to rise. This kept pressure on the Pound this morning.

On top of BoE speculation though, the Pound is being pressured by the latest Brexit uncertainties this morning.

Over the weekend, UK Chancellor Sajid Javid worsened fears of a potential hard Brexit by saying that the government did not plan to remain aligned with the EU once the Brexit process was over.

Speaking to the Financial Times, Javid said:

‘There will not be alignment, we will not be a rule taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year.’

Despite the government’s confidence that a new deal could be made, this news is still concerning markets. According to Adam Cole, Chief Currency Strategist at RBC Capital Markets:

‘It’s about the UK diverging from Europe, and that would necessarily result in limiting access to European markets,

Markets are taking that negatively.’

US Dollar (USD) Exchange Rates Remain Appealing Following Strong US Data

Optimism over US-China trade relations, combined with fresh signs of resilience in the US economic outlook, have left the US Dollar (USD) much more resilient in recent sessions.

Signs of weakness in US economic activity had caused higher Federal Reserve interest rate cut speculation for a while.

However, the latest data has been more supportive for the US outlook and this is dousing Fed speculation for now.

Last week’s US retail sales stats beat forecasts year-on-year, and housing starts data came in well above expectations. While production stats were disappointing, analysts believe these stats are not enough to pressure the Fed into becoming more dovish.

According to Jeffrey Halley, Senior Market Analyst at OANDA:

‘I think the US Dollar will continue to outperform against the major currencies,

I think the bar for a rate cut is quite high at the moment.’

Pound to US Dollar (GBP/USD) Exchange Rate Investors Await Major UK Data

The US Dollar (USD) has been supported by strong US data over the past week, but amid a quieter US economic calendar this week the currency could be driven more by other factors like strength in rivals.

The only notable US data due in the coming sessions includes US housing data on Wednesday, and PMI projections on Friday.

Britain’s upcoming data will be much more influential in comparison, especially a week ahead of the Bank of England’s (BoE) anticipated January policy decision.

UK job market data will be published tomorrow, followed on Friday by key PMI projections from Markit.

The PMI projections will give investors a better idea of how Britain’s economy is performing at the beginning of 2020. This could indicate to markets whether the BoE will need to act on UK monetary policy or not.

BoE interest rate cut bets will remain a focus for the Pound to US Dollar (GBP/USD) exchange rate, but any surprising Brexit news could be influential as well.

Josh Jeffery

Contact Josh Jeffery