GBP/USD Exchange Rate Edges Higher as US Riots Continue to Escalate
The Pound to US Dollar (GBP/USD) exchange rate rose by 0.65% today, with the pairing currently trading around $1.25.
The US Dollar (USD) has suffered from a market sell-off today as risk-sentiment continues to improve, despite protests ranging across the US over the killing of George Floyd and US-China trade tensions over Beijing’s control of Hong Kong.
Instead, investors are becoming increasingly optimistic over an improvement in the global economy. Today also saw European stocks march higher on growing hopes that the Eurozone’s economy reopening, while several nations within the bloc continue to ease their lockdown measures.
Michael Hewson, chief market analyst at CMC Markets UK, commented:
‘The main focus once again appeared on the longer-term prospects of the easing of lockdowns across the world, though if the violence on US streets continues for much longer US investors might have to cope with a lockdown of a different kind, imposed by the National Guard.’
‘This is something that President Trump hinted he might well do if the various states aren’t able to contain the outbreaks of violence across US cities.’
Meanwhile, the ‘Greenback’ has suffered as the US faces its worst civil unrest since 1968. Consequently, investors have steered clear from the US Dollar (USD) as demonstrations throughout US states continue to escalate.
Pound (GBP) Rises as Brexit Talks Reengage
The Pound (GBP) rose today as the focus has turned to Brexit talks between the UK and the EU. As this is the last round of talks ahead of the key summit later in the month, Sterling traders are hopeful that the UK could request an extension beyond the 31st December deadline.
Raoul Ruparel, the previous Brexit adviser to Theresa May’s Government, was sceptical, however:
‘If Johnson spent government money to soften the impact in these areas, he might find there is less opposition than if he were simply spending the money to offset the impact of Brexit alone, since there is far greater unity across the political spectrum on the need for such spending to aid the recovery from Covid-19.’
Meanwhile, today saw the release of April’s consumer credit report, which fell to record lows from £-3.8 billion to £-7.4 billion.
Sterling also gained on the ‘Greenback’ after it was reported that the UK Government is looking for ways to relax the 14-day quarantine retirement for entrants from abroad.
GBP/USD Outlook: Could Weak US Data Further Sink the ‘Greenback’?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the final Services PMI for May. However, with the UK’s largest sector forecast to remain deeply lodged in contraction territory, it’s unlikely we’ll see GBP make any further gains.
Meanwhile, US Dollar (USD) traders will be keeping a close eye on tomorrow’s publication of the US ISM Non-Manufacturing PMI for May. Any signs of the US economy suffering from a blow to its services economy would prove USD-negative.
Tomorrow will also see the release of the American ADP Employment Change report for May. However, if this continues to soar, we could see the GBP/USD exchange rate continue to rise.