Pound to US Dollar Exchange Rate Loses Ground as Markets Digest US Debate
The Pound Sterling to US Dollar (GBP/USD) exchange rate is slipping today, amid the latest US political news. Last night saw the first televised debate of the 2020 Presidential Election, and the chaotic nature of the debate left investors more eager to buy safe havens.
Following last week’s tumble from the interbank level of 1.29 to 1.27, GBP/USD has attempted to rebound this week. For much of yesterday, GBP/USD was trending steadily near the interbank level of 1.28.
However, since the debate last night investors have been buying safe havens once again. This is boosting the US Dollar (USD) and GBP/USD is trending slightly lower as a result.
As investors continue to digest today’s UK growth data and last night’s debate, the Pound to US Dollar exchange rate now shifts its focus back to Brexit.
Pound (GBP) Exchange Rates See Little Change after UK Growth Report
The Pound (GBP) was driven largely by movement in rival currencies today, as UK news failed to have much impact on the British currency.
While this week’s most influential UK data was published, it appears to have been largely brushed over by markets.
Britain’s final Q2 Gross Domestic Product (GDP) growth rate results beat expectations, but only slightly. The figure still came in with a shocking -19.8% contraction quarter-on-quarter. The huge -21.5% year-on-year contraction was also a little lighter than expected.
According to Yohay Elam, Analyst at FXStreet:
‘Sterling had a chance to recover after the UK published final Gross Domestic Product figures for the second quarter. The initial report of a 20.4% coronavirus-induced collapse was replaced by a fall of 19.8%. A higher base would help the British economy recover. However, the pound’s failure to bounce exposes its weakness.’
US Dollar (USD) Exchange Rates Gain as Investors Seek Safe Havens
Last night’s US Presidential Debate only worsened uncertainty over the upcoming US Presidential Election.
The first televised debate between President Donald Trump and Challenger Joe Biden was described as ‘chaotic’. It appeared characterised by Trump’s constant interruptions and a lack of focus, with the debate often descending into argument.
US political uncertainty was in focus after the debate. This was partially due to Trump’s refusal to commit to accepting the election result after the election in November.
As the US Dollar (USD) is a safe haven currency, it advanced in reaction to this uncertainty.
According to Tohru Sasaki, Head of Japan Market Research at JPMorgan:
‘It’s like as if they are both just insulting each other. There is not much impact on the markets,’
Pound to US Dollar (GBP/USD) Exchange Rate Focused on Brexit Negotiations
The UK growth report and US election debate were both some of this week’s biggest events, but they ultimately had little impact on the Pound to US Dollar (GBP/USD) exchange rate.
As a result, GBP/USD investors are turning their attention back towards the Brexit process.
The UK and EU are holding their final scheduled round of Brexit negotiations this week. Analysts predict that if there is to be any breakthrough, we could see it before the end of the week.
The Pound (GBP) could surge if there is a breakthrough or signs of a likely deal being delayed. However, Sterling could tumble if talks are seen as collapsing.
The US Dollar (USD), on the other hand, will continue to be driven by US political speculation as the debate is digested.
However, US Non-Farm Payroll data from September could also be highly influential. The report will be published on Friday, potentially causing some late-week movement in the Pound to US Dollar (GBP/USD) exchange rate.