GBP/USD Exchange Rate Sinks as Concerns Grow for British Economy amid Brexit Uncertainty
The Pound to US Dollar (GBP/USD) exchange rate dipped today, with the pairing currently trading around $1.29.
GBP traders are bracing for Downing Street’s latest announcement on further emergency measures to curb the spread of Covid-19.
Ahead of the press conference held by No 10, Prime Minister Boris Johnson said:
‘We need to act now to stop the virus spreading. So we are simplifying and strengthening the rules on social contact – making them easier to understand and for the police to enforce.’
Consequently, this has sparked concerns that new laws – which will limit gatherings of more than six-people – will negatively impact Britain’s already struggling economy. Restaurants and pubs will be affected by the new restrictions.
The GBP/USD exchange rate has, however, hit its lowest levels since late July because of growing uncertainty over Brexit. This follows Downing Street’s backtracking on the original Withdrawal Agreement, which has placed a strain on already delicate UK-EU relations.
Raffi Boyadjian, an analyst of City firm XM, commented on the latest news:
‘Only five weeks left to reach a deal and Britain and the European Union are too busy posturing than negotiating, with Boris Johnson’s latest rhetoric once again raising the prospect of a no-deal Brexit.’
US Dollar (USD) Edges Higher as Safe-Haven Demand Increases on US-China Tensions
The US Dollar (USD) edged higher today after the safe-haven ‘Greenback’ was buoyed by renewed risk-aversion. Fresh tensions between the US and China have boosted demand for USD.
This follows comments from US President Donald Trump, who recently emphasised the importance of decoupling the world’s two largest economies, US and China.
Ker Gibbs, the president of the American Chamber of Commerce, Shanghai, commented:
‘Dynamics caused by the pandemic coupled with uncertainties around the trade tensions, strong local competition and . . . regulatory change have really put management of US multinationals operating in China to the test.’
In US economic data, today will see the release of the latest MBA Mortgage Applications figure for September. Any marked improvement would boost the ‘Greenback’ as confidence in the American economy improves.
Today will also see the release of July’s US JOLTS job openings. If this increases, then we could see the US Dollar extend its gains.
GBP/USD Outlook: Could Rising UK-EU Brexit Tensions Continue to Drag Down Sterling?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the latest US Initial Jobless Claims for September. If these continue to improve, however, we could see USD extend its gains.
Meanwhile, Sterling traders will be looking ahead to Friday’s publication of the final UK GDP figure. If this edges higher in July, then we could see Sterling claw back some of its losses.
The GBP/USD exchange rate will be driven by Brexit developments. Any signs of UK-EU tensions rising following No 10’s backtracking on the Withdrawal Agreement would prove GBP-negative.