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Central Bank Outlooks to be Pivotal for Pound to US Dollar Exchange Rate

Pound to US Dollar Exchange Rate Climbing amid Risk-On Movement

The Pound Sterling to US Dollar (GBP/USD) exchange rate has been able to see modest recovery efforts today, despite persisting no-deal Brexit fears. The US Dollar (USD) remains fairly weak overall and investors are awaiting upcoming central bank news.

US Dollar weakness was not enough to prevent major GBP/USD losses last week. GBP/USD lost around 4 cents last week overall, slumping from 1.3277 to 1.2797.

This week so far though, GBP/USD trends with an upside bias as the pair attempts to rebound from a monthly low of 1.2766. At the time of writing, GBP/USD trends in the region of 1.2890. This still leaves it well below last week’s levels.

With the Federal Reserve and Bank of England (BoE) set to hold September policy decisions in the coming days, it could still be a big week for the Pound to US Dollar exchange rate.

Pound (GBP) Exchange Rate Gains may be Limited amid No-Deal Brexit Fear

The Pound has been trending a little higher this week. Investors have been buying it back from its cheapest levels as no-deal Brexit fears are reassessed.

Today’s UK job market report boosted the currency a little as well. The data beat expectations, but optimism around the data was limited. This is because the details of the data included concerns that the job market outlook would only worsen in the coming months.

On top of this, analysts believe that persisting no-deal Brexit fears mean the Pound’s gains are limited. According to Analysts at MUFG:

‘There appears to be no easy quick way out to resolve the latest gridlock in UK-EU trade negotiations,

A deal is only probable very late in the day now and hence any short-term Pound bounce will not last with potential big declines still to come.’

US Dollar (USD) Exchange Rates Slide as Risk-Sentiment Improves

Last week, the US Dollar found a little support as investors looked for safer investments. The US Dollar is a currency typically considered a ‘safe haven’.

A combination of global factors, including a coronavirus second wave, no-deal Brexit fears and US-China trade tensions, all left investors avoiding risks.

However, due to the US coronavirus situation, the US Dollar outlook remains weak overall. This made it easy for GBP/USD to rebound this week, with traders more willing to take risks again.

Yesterday’s US consumer inflation expectations data had no notable impact on the US Dollar. USD investors are largely awaiting Wednesday’s Federal Reserve news.

Pound to US Dollar (GBP/USD) Exchange Rate Outlook Awaits Central Bank News

The focus for the Pound outlook remains the Brexit process, with the UK government’s controversial and hard stance on Brexit negotiations still progressing through UK law.

If the UK government’s plan succeeds, the Pound outlook could worsen further as no-deal Brexit fears may intensify.

However, if there are no surprising Brexit developments in the coming sessions, investors will turn towards upcoming central bank news for the outlook.

The Federal Reserve policy decision, set for Wednesday, is likely to be the biggest news this week for US Dollar investors. The Bank of England’s (BoE) own September policy decision will follow on Thursday.

If central bank news is unsurprising, then upcoming UK and US retail sales data could also influence the Pound to US Dollar (GBP/USD) exchange rate outlook.