Pound to US Dollar Exchange Rate Tumbling on Fresh Brexit Fears
In what has largely been a recoil from last week’s movement, the Pound Sterling to US Dollar (GBP/USD) exchange rate tumbled today. Political and economic concerns continue to overshadow the outlooks of both currencies.
Last week saw GBP/USD put in strong gains, as it rebounded from near a decade low of 1.2022 and gained over a cent to close the week near the level of 1.2147.
This week so far though, GBP/USD has already shed over half of those gains and trended closely to the level of 1.2070 at the time of writing.
For now the pair may be in for further losses on Brexit fears, at least until later in the week when market focus will shift towards the Federal Reserve outlook.
Pound (GBP) Exchange Rates Slump amid Fresh UK-EU Brexit Tensions
Concerns that the UK government’s relations with the EU could worsen further and deepen the possibility of a worst-case scenario no-deal Brexit, have led to fresh weakness in the Pound today.
Prime Minister Boris Johnson sent a letter to the EU requesting the Brexit withdrawal agreement to be renegotiated without the controversial Irish backstop, but the EU maintains that the backstop is central to the agreement.
According to a tweet from Donald Tusk, European Council President:
As a result of persisting fears that the government could lead Britain towards a no-deal outcome, Sterling was little affected by today’s UK factory data from the CBI, which wasn’t quite as poor as forecast.
US Dollar (USD) Exchange Rates Steady in Anticipation of Federal Reserve News
US Dollar (USD) movement has been mixed in recent weeks.
While the safe haven currency has been slightly more appealing amid global trade war and growth slowdown fears, there are also concerns that the US economy could be directly hit by trade wars or may even fall into recession.
US economic fears have also led to speculation that the Federal Reserve could still be pressured into taking a more dovish stance on US monetary policy, despite its recently cautious and neutral stance.
As a result investors are highly anticipating this week’s Federal Reserve news, and are hesitant to make major movements on the US Dollar until then.
GBP/USD losses today were more due to Pound weakness, than US Dollar strength.
Pound to US Dollar (GBP/USD) Exchange Rate Investors Await Major Federal Reserve News
Amid a quieter economic calendar for the UK and US, the Pound and US Dollar are likely to be driven more by political and Federal Reserve news for the remainder of the week.
Sterling investors will remain focused on Brexit developments, including talks between the UK Boris Johnson government and EU officials.
Unless there are surprising Brexit developments, GBP/USD movement may be driven more by the US Dollar and Federal Reserve news though.
The Fed’s latest meeting minutes report will be published on Wednesday, and could give investors a better idea of the Fed’s tone at its last policy decision which was more hawkish than expected.
However, a late-week speech from Fed Chairman Jerome Powell as well as the upcoming Jackson Hole Symposium could be even more influential for the US Dollar and the Pound to US Dollar (GBP/USD) exchange rate outlook.