GBP/USD Exchange Rate Subdued as Brexit Uncertainty Weighs
The Pound to US Dollar (GBP/USD) exchange rate is rangebound this morning as lingering concerns over Brexit dampen the appeal of Sterling.
At the time of writing the GBP/USD exchange rate is trading at around $1.2558, virtually unchanged from this morning’s opening rate.
Pound (GBP) Sidelined by Brexit Worries
The Pound (GBP) is struggling to find momentum this morning as renewed Brexit concerns drag on Sterling sentiment.
Despite claims from Boris Johnson that a trade deal with the EU could be reached this month with a ‘bit of oomph’, July’s ‘intensified’ talks have so far failed to bear fruit.
In fact progress appears to have been glacial this month as both the UK and EU have spoken of ‘significant differences’ in talks.
Adding to the pressure on the Pound are fears that the UK could be ostracizing some of its biggest potential post-Brexit trading partners.
GBP Investors are particularly worried about the UK’s future trade relationship with China after relations between the two countries have soured in recent weeks in response to Johnson’s comments on Hong Kong and the government’s decision to phase out the usage of Huawei’s 5G equipment.
UK Prime Minister Boris Johnson is set to ban #Huawei from Britain's 5G network, angering China but delighting President Trump by signaling that the world's biggest telecoms equipment maker is no longer welcome in the West https://t.co/Clrt2EjIJY
— Reuters (@Reuters) July 14, 2020
US Dollar (USD) Supported by Safe-Haven Demand
Meanwhile, after spending much of the week on the back foot, the US Dollar (USD) has finally begun to find its feet today as easing market optimism fuels demand for the safe-haven ‘Greenback’.
This comes in part as the US recorded a new daily record of 77,300 new coronavirus cases, stoking fears that the recovery in global growth is likely to be more prolonged than initially hoped.
Further buoying demand for the US Dollar are rising US-China tensions, following reports the White House is considering a blanket ban on all Chinese Communist Party members and their families to the US.
Deliberations are reportedly at an early stage, but the threat of such a move is sure to force a response from Beijing and exacerbate tensions between the two nations.
Investors fear these tensions could threaten the fragile trade deal agreed back in January, with a renewed trade war between the two powers likely to further hinder a rebound in the global economy.
GBP/USD Forecast: Upbeat US Consumer Sentiment to Lift the US Dollar?
Still to come this week is the publication of Michigan University’s US consumer sentiment index later this afternoon.
This could help the US Dollar (USD) to close this week’s session on a high if consumer confidence continued to improve this month.
Meanwhile, GBP investors will now begin to turn their attention to next week’s session, with the focus on the UK’s latest PMI figures.
This could help to buoy the Pound next week if July’s preliminary figures report that the UK private sector returned to growth after four consecutive months of contraction.
However, with Brexit also likely to remain a key concern for GBP investors any upside in Sterling is likely to remain capped so long as talks remain deadlocked.