Pound Sterling US Dollar (GBP/USD) Exchange Rate Recovers Ground as Brexit Anxiety Eases
Pressure on the Pound Sterling to US Dollar (GBP/USD) exchange rate eased ahead of the weekend as markets braced for Theresa May to announce a departure date.
While a significant degree of political uncertainty continued to hang over Pound Sterling (GBP) this was not enough to encourage investors to continue selling out of the currency.
With the risk of an upcoming Conservative leadership contest and a potential no-deal Brexit already largely priced into the Pound the downside potential of GBP exchange rates diminished.
A smaller-than-expected contraction in UK retail sales also offered a boost to the Pound on Friday morning.
Although consumer spending still showed signs of weakening in April, suggesting the impact of slowing wage growth, this was not enough to prevent the GBP/USD exchange rate recovering some of its lost ground.
US Dollar (USD) Vulnerable Ahead of Durable Goods Orders Data
The mood towards the US Dollar (USD), meanwhile, soured in response to an underwhelming set of manufacturing and services PMIs.
As factory orders fell to a nine-year low in May confidence in the underlying health of the world’s largest economy naturally weakened.
This left USD exchange rates on a weaker footing on Friday, especially as the Trump administration signalled a potential willingness to reopen trade talks with China.
Further losses could be in store for the US Dollar on the back of April’s durable goods orders data, with forecasts pointing towards a -2.0% contraction on the month.
Evidence that domestic demand is faltering would leave investors with little incentive to buy into the US Dollar ahead of the weekend.
Signs that the ongoing trade spat between the US and China is weighing heavily on US consumers would offer the GBP/USD exchange rate a fresh boost.
Political Developments Continue to Dominate Pound Sterling (GBP) Outlook
Even though political anxiety has eased somewhat GBP exchange rates remain vulnerable to any major shifts in the UK political landscape.
The results of the European Parliament elections could put a renewed dampener on the Pound if the Conservatives suffer a significant defeat.
Gains for the newly-formed Brexit Party would also leave the Pound vulnerable to selling pressure, with markets still jittery over the rising odds of a no-deal Brexit.
With fresh UK data thin on the ground next week investors may struggle to find incentive to favour the Pound over its rivals, limiting the potential for further GBP/USD exchange rate gains.
Once Theresa May announces a departure date focus looks set to shift towards the ensuing Conservative leadership contest, with the Pound likely to remain on the back foot as long a hard-line Brexiteer remains the frontrunner.