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Pound Sterling to US Dollar Exchange Rate Outlook Could Worsen Further if US Data Impresses

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Pound to US Dollar Exchange Rate Trends near Worst May Levels ahead of US Retail Stats

The Pound to US Dollar (GBP/USD) exchange rate has seen broadly bearish performance over the past week as Brexit concerns revive and the US Dollar (USD) benefits from market safe haven demand. The pair’s outlook could worsen even further on strong US data though.

After opening last week near a monthly high of 1.3174, GBP/USD tumbled throughout and eventually closed the week at the level of 1.3000.

GBP/USD has only continued to fall since markets opened this week, and this morning the pair touched on a fresh May low of 1.2903, trending only slightly higher than those lows at time of writing.

Investors have had little interest in buying the Pound (GBP) as hopes for a cross-party Brexit deal have faded and concerns about the stability of UK politics have worsened.

Meanwhile, US Dollar investors are anticipating key US data while the currency is supported by market demand for safe haven currencies.

Pound (GBP) Exchange Rates Unappealing as Unpopular Brexit Deal Set to Return to Parliament

When markets opened this week, some brief remaining hopes for a soft Brexit deal to be reached in cross-party Brexit talks gave Sterling some support.

However, expectations that cross-party talks will fail to lead to any solid deal continue to rise, leaving the outlooks for Brexit, Britain’s economy and the Pound filled with uncertainties.

Investors were even more hesitant to buy the Pound this morning, as the UK government announced that it would hold yet another Parliament vote on its thrice-defeated long-negotiated Brexit deal.

The deal will reportedly be put to Parliament for the fourth time in the week beginning the 3rd of June.

Analysts are concerned that a fourth failure will lead to deeper uncertainty in UK politics as Prime Minister Theresa May will likely step down by the end of June. According to Petr Krpata, FX Strategist at ING:

‘Failure to pass the deal [in June] could well see May finally step down, opening the door for a more Eurosceptic Prime Minister. The Pound risks $1.2800 in the near term,’

US Dollar (USD) Exchange Rates Resilient as Investors Anticipate Trade News and Data

The US Dollar has been able to more easily advance versus a weaker Pound in recent weeks, thanks to higher market demand for safe haven currencies.

As US-China trade tensions have flared up and the trade war is perceived as having resumed, investors are seeking safer investments.

However, concerns that the US economy could be negatively influenced by the trade war are still limiting US Dollar demand.

Investors are still generally anxious that the US economy could have been hit by slowing global growth. Trade jitters have made investors more concerned that the Federal Reserve may be pressured to cut US interest rates over the next year.

As a result, investors are now highly anticipating major upcoming US data to paint a better picture of how the US economic outlook is faring.

Pound to US Dollar (GBP/USD) Exchange Rate Investors Anticipate US Retail Sales Report

The Pound outlook lacks much in the way of support, and if upcoming US data bolsters US Dollar demand then the pair could be in for further losses.

This afternoon’s American session will see the publication of April’s US retail sales results.

US retail sales are expected to have slowed from 1.6% to just 0.2% month-on-month, but if the data beats expectations investors may become more confident in the resilience of the US economy.

Other US data to keep an eye out for includes manufacturing and industrial production stats from April, also due this afternoon.

US housing data and consumer sentiment survey figures from Michigan will be published towards the end of the week, and could also influence US Dollar movement.

Meanwhile, the Pound will likely continue to face pressure from concerns of months of Brexit uncertainties, so unless upcoming US data is disappointing the Pound to US Dollar (GBP/USD) exchange rate outlook is likely to remain weak.