Pound to US Dollar Exchange Rate Avoids Losses despite Optimistic Fed Shift
The Pound Sterling to US Dollar (GBP/USD) exchange rate has sustained most of this week’s gains so far, even as today rounded out a week of disappointing UK data, and the latest Federal Reserve news softened Fed rate cut bets.
Since opening this week at the level of 1.2775, GBP/USD trended with a solid upside bias, holding almost a cent of gains.
While GBP/USD has failed to hold the weekly high of 1.2882 seen at the beginning of the week, the pair is only trending slightly lower in the region of 1.2855 at the time of writing.
The US Dollar (USD) saw modest gains overnight in reaction to Federal Reserve speculation. Ultimately however, UK election hopes are keeping the Pound (GBP) outlook buoyed and preventing Pound to US Dollar exchange rate losses.
Pound (GBP) Exchange Rates Supported by Election Hopes despite Poor UK Data
Investors are hesitant to sell the British currency too much, amid hopes that next month’s UK General Election will lead to an outcome which could boost the chances of a relatively soft Brexit.
Election polling suggests that the ruling Conservative Party will win a majority, allowing it to more easily pass its Brexit plans. This is keeping no-deal Brexit fears at bay and helping the Pound to sustain most of the gains it saw in recent months.
As a result of focus on UK election uncertainties, Sterling continues to hold its ground despite this week’s sets of disappointing UK data.
Today saw the publication of Britain’s October retail sales stats. The data revealed an unexpected monthly contraction, but didn’t cause much notable Pound weakness.
US Dollar (USD) Exchange Rates Struggle to Hold Ground amid US-China Trade Jitters
The US Dollar saw a brief boost in demand last night, as Federal Reserve Chairman Jerome Powell surprised markets with a cautiously optimistic stance on US monetary policy and the economy.
During a testimony to US Congress, Powell signalled a pause in interest rate cuts, indicating that the current level of monetary policy would help the economy to grow steadily.
He said that the bank would continue to respond appropriately to data:
‘We will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the federal funds rate,’
Despite this though, the US Dollar struggled to hold its ground today with GBP/USD resilient.
Demand for the US Dollar was weakened due to fresh concerns about US-China trade tensions, amid reports that negotiations had ‘hit a snag’ despite recent hopes that a preliminary deal was close.
Pound to US Dollar (GBP/USD) Exchange Rates Could Climb Higher if US Data Disappoints
The Pound to US Dollar (GBP/USD) exchange rate has seen strong performance, despite weak UK data and fading Federal Reserve interest rate cut bets.
As UK election hopes continue to boost the Pound and US-China trade jitters weigh on the US Dollar, GBP/USD could be in for even further gains if Federal Reserve interest rate hike speculation rises again.
For now, US Dollar investors are hoping that the US economy will see sustained growth. However, if upcoming US data disappoints markets it could cause fresh rate cut speculation.
Key US news and data is still due ahead of the weekend. US jobless claims and further testimony from Fed Chairman Jerome Powell will come in this afternoon, with US retail sales and production stats from October due tomorrow.
Surprising US data could influence the Pound to US Dollar (GBP/USD) exchange rate outlook if they influence Fed speculation, and UK election developments will remain influential as well.