Pound US dollar (GBP/USD) exchange rate ticks up amid Labour victory
The pound US dollar (GBP/USD) exchange rate is edging higher this morning following the publication of the UK’s general election results.
At the time of writing, GBP/USD is trading at around $1.2778, up roughly 0.2% from this morning’s opening levels.
Pound (GBP) holds steady following UK election
Although up against the US dollar (USD), the pound (GBP) is muted against the majority of its peers this morning as markets digest the outcome of the UK general election.
As expected, Kier Stermer’s Labour party secured a landslide victory, winning 410 out of the 650 seats in parliament, ending 14 years of Conservative rule which has become increasingly turbulent in recent years.
However, as Labour’s majority was largely priced in, GBP exchange rates have seen limited movement. Investor attention will now turn to the new Prime Minister’s policy priorities in his first 100 days in office.
Paul Dales, Chief UK Economist at Capital Economics commented:
‘The big shift in the political landscape that has delivered the first Labour government since May 2010 is unlikely to lead to anything like as big a shift in the economic landscape. But at the margin, the policies of the new Labour government generate some upsides to our GDP, inflation and interest rate forecasts. The stability of the pound overnight is no surprise as a Labour win was already priced into the markets.’
US dollar (USD) dips ahead of high impact data
The US dollar is on the defensive against the majority of its peers this morning as investors await the latest US jobs data.
The latest non-farm payrolls figures, scheduled for release this afternoon, are forecast to report the number of new jobs added by the US economy plunged from 272,000 to 190,000 in June.
At the same time US unemployment is forecast to remain at a two and a half year high.
Should this afternoon’s labour data print as expected, this could ramp up Federal Reserve interest rate cut bets for September, and in turn undermine USD.
GBP/USD exchange rate forecast: central bank speeches to drive movement?
Looking past this afternoon’s jobs data to next week we may see movement in the pound US dollar exchange rate influenced by speeches from Bank of England (BoE) and Federal Reserve policymakers.
After cancelling all public statements ahead of the UK election, a speech by BoE Chief Economist Huw Pill will be hotly anticipated by GBP investors amid hopes he will shed more light on a potential August interest rate cut.
Turning to the US dollar, the Fed’s Chairman Jerome Powell is scheduled to testify before Congress next week where he will be grilled on the US central bank’s decision to keep interest rates at a two-decade high. If he signals the bank is getting closer to cutting rates the US dollar is likely to weaken.