- GBP USD Recovers to 1.3000 as Trading Week Ends – Begins Week Strong
- UK US Trade Talks Begin Monday – Trump Expects ‘Powerful’ Trade Deal to be Completed ‘very quickly’
- Big Data Calendar Week for this Pair – UK and US GDP, Fed Rate Decision, PMI figures and more
The Pound to US Dollar exchange rate fluctuated a great deal towards the end of last week as both the UK and the US experienced their own respective data disappointments and controversies.
For the UK, anxieties surrounding Brexit negotiations continued as the week drew to a close without perceivable progression.
Michael Barnier, Chair of the European Commission, claimed that the UK’s position lacked clarity, whilst UK Brexit Secretary David Davis claimed the opposite, stating that negotiations had been ‘robust’. Investors were, unconvinced regardless, causing this pairing to oscillate quite wildly.
GBP USD Gains as Trump-Russia Investigation Continues and Sean Spicer Resigns
Across the pond last week the investigation into possible links between the Trump administration and Russia continued, with US President Donald Trump shifting his legal team. This alone caused traders to become slightly anxious, however it was Sean Spicer’s resignation that broke the camel’s back as markets temporarily lost faith in the Republican party’s ability to make good on their promise of tax reforms – especially with the healthcare bill so recently failing to pass.
These controversies allowed Sterling room to capitalise against the US Dollar and helped GBP/USD move away from its recent lows.
UK US Trade Deals Begin, Long-term GBP USD Forecast Positive
The UK is due to hold its first trade talks with the US today in order to sketch out the preliminary details of a post-Brexit trade deal.
Liam Fox, International Trade Secretary, is currently in Washington and is due to begin discussions with counterpart Robert Lighthizer.
Whilst talks can take place, under EU rules the UK cannot sign a trade deal with the US until they have left the bloc.
The forecast for these talks is positive, with traders recognising that a more significant trade deal with the US will help negate the perceived damage caused by leaving the EU’s single market.
The Department for International Trade supported this notion, describing the focus of these talks as:
‘…providing certainty, continuity and increasing confidence for UK and US businesses as the UK leaves the EU’.
Given the length of time Brexit negotiations are expected to take, any benefits to the UK economic outlook and the Pound as a result of a US trade deal aren’t likely to be felt in the immediate future.
GBP USD Forecast: US Fed Rate Decision, UK and US GDP Ahead
This week has a significant number of heavy hitters in terms of UK and US data, with US PMI data due later today, US consumer confidence set to be published on Tuesday, the Federal Reserve’s rate decision and UK GDP due Wednesday, US durable goods Thursday and finally US GDP on Friday.
The most significant event for the US Dollar will be Wednesday’s US Federal Reserve meeting (July 23rd) at 19:00 BST. Whilst markets are not currently predicting an increase in rates at said meeting, they are eying the possibility of a hawkish quote being included in the accompanying statement. However, with US data being slightly poorer than anticipated recently, some are concerned that the Fed may be dovish and stop hinting that rates are likely to be increased once more in 2017.
On the GDP front, markets are currently expecting a figure of 2.6% on the year, far higher than the rate of 1.4% recorded in the first quarter. Year-on-year UK growth is believed to have eased from 2% year-on-year to 1.9%. If this materialises then Sterling could come under some pressure, but GBP/USD also has the opportunity to claw back some losses if the Fed statement proves dovish.
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