Pound US Dollar (GBP/USD) Exchange Rate Weakens as UK Industrial Action Impacts Businesses
The Pound US Dollar (GBP/USD) exchange rate has weakened this morning, as industrial action in the UK weighs on businesses.
At the time of writing, GBP/USD is trading at around US$1.2172, a fall of roughly 0.3% from the morning’s opening rates.
Pound (GBP) Struggles as Investors Focus on UK Domestic News
The Pound (GBP) is struggling for support this morning, as scarce data leads investors to focus on the economic outlook.
With industrial action occurring across various sectors such as transport and healthcare, UK businesses are beginning to feel the strain. The UK’s hospitality sector, already struggling amid soaring energy costs and staff shortages, is facing falling bookings due to strikes.
Kate Nicholls, Chief Executive Officer of UKHospitality, said businesses had seen cancellations increase by 30%. She further added:
‘We’re getting into omicron territory. A lot of people are saying it’s too difficult to come in, and if you’re writing off next week, you might as well write off the week after. So it’s going to be an early Christmas shutdown.’
With industrial action showing little sign of slowing, the hospitality sector is the latest to signal worries about its impact.
Yesterday, greetings card retailer Moonpig voiced similar concerns, saying postal strikes had impacted profit. While PM Rishi Sunak has promised ‘tougher’ laws to ensure minimum service, the UK economy may continue to struggle.
US Dollar (USD) Firms amid Cautious Market Mood
The US Dollar (USD) is strengthening this morning, as the market sentiment shifts to risk averse trade.
Investors have grown concerned about the global outlook, with geopolitical and economic risks weighing on trade.
Recently, Ukraine has launched missile strikes deep into Russian territory. Russian President Vladimir Putin has also stated that the conflict could continue for some time, leading to fears of further escalation.
Additionally, Taiwanese exports have slumped substantially pointing to a downturn in the global economy.
As such, the safe-haven ‘Greenback’ is finding support this morning, as the risk aversion drives trade towards safe bets.
Pound US Dollar (GBP/USD) Exchange Rate Forecast: US PPI in Focus
Looking ahead for the US Dollar, tomorrow brings the latest set of PPI data. With inflation previously showing signs of cooling, the MoM figure showing no change may inspire further rate hike bets.
However, with the YoY figure expected to print at 5.9%, down from 6.7%, these bets may be fleeting. As such, USD may see modest support from these bets, but they may not bring strong gains.
Further adding a small tailwind to the ‘Greenback’ could be Friday’s Michigan consumer sentiment reading. The data is forecast to show an uptick to 56.9 from 56.8. Increasing consumer optimism may bring support to the consumption-based US economy and strengthen USD.
For the Pound, data remains scarce. Sterling may continue to trade on market sentiment towards the UK economy. With UK businesses contending with industrial action, the recession and the cost-of-living crisis, further bleak headlines could wound GBP.
However, any optimism towards the Northern Ireland Protocol could bring Sterling modest support. The Brexit issue has seen signs of a solution recently, and any further positive developments could cheer to GBP investors.