Pound to US Dollar Exchange Rate Fails to Rebound as Brexit Doubts Persist
At the beginning of the month, the Pound Sterling to US Dollar (GBP/USD) exchange rate saw significant gains, but almost all of those gains were shed last week as fresh Brexit uncertainty hit the Pound (GBP) outlook.
After opening last week at the level of 1.3172, GBP/USD fell all week. The pair’s descent slowed before markets closed due to weak US data, but GBP/USD still closed the week far lower near the level of 1.3000.
GBP/USD was able to hold above last Thursday’s May low of 1.2978, and at the time of writing the pair trended closer to the level of 1.3005.
Both the Pound and the US Dollar (USD) steadied following last week’s tumble. The US Dollar was weakened by poor US data before markets closed last week, but the currency’s status as a safe haven helped it to rebound from its late-week losses.
Pound (GBP) Exchange Rates Edge Higher on Fresh Brexit Speculation
The Pound continues to be driven largely by shifts in Brexit sentiment in recent weeks. As hopes for success in cross-party Brexit talks faded last week, the Pound slumped and saw major losses versus major rivals like the US Dollar.
As a result, while speculation of a second referendum of some kind rose today, the Pound’s potential for gains was limited.
UK Shadow Brexit Secretary Sir Keir Starmer said that the only way for a cross-party Brexit deal to get through Parliament would be if a confirmatory vote were held.
Hopes for a cross-party deal to be reached are low however, and concerns that the Conservative Party could shed support at the upcoming EU elections are also weighing on the Pound.
US Dollar (USD) Exchange Rates Rebound despite Fresh Weakness in US Outlook
While the latest US data has continued to fall short of expectations and worsen concerns that the US economic outlook is being impacted by slowing global growth, the US Dollar rebounded slightly this morning.
Last week saw US-China trade tensions flare up again after months of hopes that a deal would soon be reached.
As the US Dollar is a safe haven currency, it is likely to benefit from market aversion to risks even if there are concerns over how the trade war could impact the US economy or Federal Reserve interest rate hike bets.
Analysts are split on whether the US Dollar will ultimately climb or fall however. Some have suggested that the US Dollar will continue to rise versus riskier investments, but according to Strategists from Morgan Stanley:
‘Looking ahead, tighter global liquidity conditions seem more likely, which will not bode well for currencies of areas dependent on capital imports like USD,
The tide may be turning for USD’
Pound to US Dollar (GBP/USD) Exchange Rate Investors Anticipate US Data
As Pound investors continue to focus on Brexit shifts and developments, the British currency may not see much in the way of significant movement before the EU Elections next week.
Investors may be hesitant to move much on the Pound on political concerns, so US data and news may be more likely to influence Pound to US Dollar (GBP/USD) exchange rate movement this week.
In particular, US-China trade negotiations and upcoming US data are the most likely to cause movement.
US import and export prices data will be published tomorrow, with key US retail sales and production stats due for publication on Wednesday.
If US retail sales beat forecasts, the US economic outlook may become more resilient and GBP/USD will slip.
Of course, any news making a softer Brexit look more likely could strengthen the Pound to US Dollar (GBP/USD) exchange rate, while worsening US-China trade tensions could have a mixed impact on the pair.