GBP/USD Exchange Rate Falls as Brexit Concerns Weigh on Pound
The Pound to US Dollar (GBP/USD) exchange rate fell today, with the pairing currently trading around $1.317.
Sterling dipped today following news that Prime Minister Boris Johnson had entered self-isolation after coming into contact with someone who had tested positive with the coronavirus.
As a result, GBP traders are remaining cautious as this could be a potentially pivotal week for Brexit.
Matt Hancock, the British Health Secretary, commented: ‘I’m sure that if the prime minister needs to speak to anybody in Europe, then he’ll be able to do that by Zoom.’
A Number 10 spokesman commented:
‘He will carry on working from Downing Street, including on leading the government’s response to the coronavirus pandemic. The PM is well and does not have any symptoms of Covid-19.’
Nevertheless, Brexit has caused further concern after Simon Coveney, Ireland’s Foreign Minister, warned that a breakthrough was required to avert a no-deal Brexit.
In UK economic data, today saw the release of the Rightmove House Price Index, which fell from 1.1% to -0.5%.
Russell Galley, the managing director at the Halifax, commented:
‘With a number of clear headwinds facing the housing market, we expect to see greater downward pressure on house prices as we move into 2021.’
US Dollar (USD) Rises Despite Weak US Consumer Confidence
The US Dollar suffered last week due to poor US Consumer Confidence. The University of Michigan’s latest consumer morale gauge revealed a slide in consumer confidence in the American economy.
US consumer confidence was beset by concerns over America’s Covid-19 situation and political uncertainties ahead of the US 2020 elections.
USD’s gains have been compromised by improving risk-sentiment, however, with hopes of a Covid-19 vaccine dampening demand for the safe-haven US Dollar.
US-China trade developments are still in focus. Any further escalations in talks between the two largest economy’s could boost the US Dollar.
Ilya Spivak, the Head Stragtegist at APAC, explains:
‘US-China trade war escalation through the Trump administration’s ‘lame duck’ period before team Biden takes over in late January might be another headwind. The outgoing President moved to ban US investment in Chinese military-linked firms. Beijing predictably bristled out loud. Another round of tit-for-tat countermeasures may follow. In all, this means that the Greenback may yet reclaim a haven bid.’
Today will see a speech from Richard Clarida, the Vice Chairman of the Board of Governors of the Federal Reserve System.
Any downbeat comments about the American economy could bolster demand for safe-haven currencies like the ‘Greenback’.
GBP/USD Outlook: Could Brexit Fears Drag Down Sterling?
US Dollar (USD) traders will be awaiting tomorrow’s release of October’s US Retail Sales report.
If retail sales throughout America drop, then we could see growing concerns for the world’s largest economy dampen risk sentiment and boost USD.
GBP investors will be awaiting tomorrow’s speech from the Bank of England’s Governor Andrew Bailey.
However, any dovish commentary about Britain’s economy would prove GBP-negative.
Brexit developments will drive the GBP/USD exchange rate this week.
As a result, Sterling could fall if Downing Street maintains its hard-line position on Brexit, threatening a possible no-deal on January 1st 2021.