Pound US Dollar Exchange Rate Remains Below $1.19 amid UK Political Jitters
The Pound US Dollar (GBP/USD) exchange rate is stuck in a narrow range this morning. The pairing trading just shy of a two-year low amid UK political uncertainty.
At the time of writing the GBP/USD exchange rate is trading at around $1.1962. Virtually unchanged from this morning’s opening levels.
Pound (GBP) Faces Turbulence Following Cabinet Resignations
The Pound (GBP) is trading without conviction this morning. Fresh political uncertainty suppressing Sterling sentiment.
This follows the resignation of two high-profile members of Boris Johnson’s cabinet yesterday evening. Heath Secretary Sajid Javid and Chancellor Rishi Sunak dramatically resigned in minutes of one another, stating they had lost confidence in Johnson.
Fresh questions over Johnson’s future as Prime Minister are likely to infuse additional volatility into the Pound. At least in the near-term.
Gabriele Foà, co-portfolio manager at Algebris Investments, comments:
‘In the short term, key cabinet member resignations will lead to more Pound volatility. After last month’s confidence vote, Johnson’s position is clearly more unstable and increased uncertainty around the next government will weigh on the currency.
While any further political uncertainty is likely to be GBP negative, there remains a chance for Sterling to firm amid hopes a new Chancellor may be willing to be a little looser with fiscal policy and offer more support to the UK economy.
US Dollar (USD) Takes a Breather Following Yesterday’s Aggressive Climb
The US Dollar (USD) is subdued this morning as a modest risk rally dampens safe-haven demand.
USD exchange rates raced higher on Tuesday. Fresh recession fears catapulted the US Dollar index being catapulted to a new 20-year high.
Fears a potential energy shortage in Europe could trigger a Eurozone recession dominated market sentiment yesterday. Stoking wider recession fears and prompted another equity selloff.
Reinforcing support for the US Dollar is the expectations the Federal Reserve will deliver several more aggressive rate hikes before the end of 2022.
Pound US Dollar Exchange Rate Forecast: Hawkish FOMC Minutes to Boost USD?
The Pound US Dollar exchange rate could come under pressure this evening with the publication of the minutes from the Fed’s June policy meeting.
The minutes are expected to reinforce the Fed’s hawkish outlook on monetary policy. This could bolster aggressive Fed rate hike bets and boost the US Dollar.
In the meantime, the ‘Greenback’ could face some headwinds with the publication of the latest ISM non-manufacturing PMI. Economists forecast June’s index will report US service sector activity slowed.
Meanwhile, UK data is thin on the ground through the remainder of this week. This is likely to leave the focus for GBP investors on domestic politics.