Pound to US Dollar (GBP/USD) Exchange Rate Slips on Poor UK Data and US Presidential Debate

Pound to US Dollar Exchange Rate Remains Higher despite Sliding from Monthly Best

Update 16:37 BST 23/10/2020:

Investors continued to sell the Pound Sterling to US Dollar (GBP/USD) exchange rate back from its monthly highs on Friday.

The Pound (GBP) was hit lower by concerning UK services data. It showed Britain’s economy was being hit hard by the coronavirus second wave.

GBP/USD is still on track to end the week above the key level of 1.30 however, sustaining gains of around a cent from the week’s opening levels.

US Dollar (USD) demand was decent as US political uncertainty boosted safe haven demand. However, some mixed US data limited the US Dollar’s appeal.

(Originally published 10:40 BST 23/10/2020)

Pound to US Dollar Exchange Rate Only Sees Limited Support from Strong UK Retail Stats 

Uncertainty over Brexit and US politics have led to volatile and mixed movement in the Pound Sterling to US Dollar (GBP/USD) exchange rate in recent weeks. Brexit hopes pushed the Pound (GBP) higher today, but higher safe haven demand is boosting the US Dollar (USD). 

Since opening this week at the interbank level of 1.29, GBP/USD has been trending with an upside bias. GBP/USD touched on a high of 1.31 in the middle of the week, the pair’s best level in a month and a half. 

GBP/USD has since slipped back from those best levels, but remains well up on the week’s opening levels. At the time of writing, GBP/USD trends in the interbank region of 1.30. 

If Brexit optimism continues to improve in the coming weeks, the Pound may be in for further gains. Focus on the US 2020 Presidential Election is also likely to intensify. 

Pound (GBP) Exchange Rates Finding Little Fresh Support from Strong UK Data 

The Pound (GBP) has seen a jump in demand this week. It comes in reaction to news that UK-EU Brexit negotiations would officially continue, after days of UK officials indicating they had walked away from talks. 

News of continuing negotiations was seen as a sign that both sides were eager to secure a deal regardless of political gestures. This has boosted bets of a Brexit deal being agreed over the coming month or so, and boosted Sterling as well. 

The Pound also found a little fresh support from today’s stronger than expected UK retail sales results. 

Retail sales came in at 4.7% year-on-year rather than the expected 3.7%. 

US Dollar (USD) Exchange Rates Firm as US Presidential Debate Causes Cautious Mood 

After the first US 2020 Presidential Debate was seen as chaotic and a poor showing for US President Donald Trump, last night’s second debate was comparatively more measured. 

Though the debate was once again heated, President Trump was overall more restrained. This made markets more uneasy, as the US 2020 Presidential Election could become more uncertain if polls tighten. 

Democrat Challenger Joe Biden is currently well ahead in the polls, but fears of a contested election are boosting safe haven demand. This helped the safe haven US Dollar strengthen slightly at the end of the week. 

According to Gary Ng, Economist at Natixis: 

‘The market reaction is rather muted in Asian trading hours but has slightly tilted towards a more conservative sentiment as seen in the strengthened Dollar index,’ 

Pound to US Dollar (GBP/USD) Exchange Rate Increasingly Focused on Politics 

Next week is the final week of October. As the month draws to a close, markets will become increasingly focused on a November filled with pivotal political events. 

UK and EU Brexit negotiators predict that a Brexit deal of some kind can be agreed by mid-November. This makes November a highly key month for the Brexit process and the Pound’s (GBP) outlook. 

Meanwhile, the US 2020 Presidential Election will take place in early November. If the US polls tighten, the US Dollar (USD) could benefit from higher market demand for safe haven currencies. 

Political developments are likely to take focus for GBP/USD in the coming weeks, but some ecostats due next week will be watched by markets as well. 

Towards the end of next week, US growth rate data will be published. This, as well as any potential developments in the coronavirus pandemic, could also influence the Pound to US Dollar (GBP/USD) exchange rate. 

Josh Jeffery

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