Home » GBP » GBP to USD » Pound US Dollar Exchange Rate to Slide Further amid Ongoing UK Political Instability?

Pound US Dollar Exchange Rate to Slide Further amid Ongoing UK Political Instability?

US Dollar banknotes

GBP/USD Exchange Rate Set to Slump Further UK Political Uncertainty

The Pound US Dollar (GBP/USD) exchange rate is softening today as uncertainty surrounding the vacant Prime Minister seat could continue to September.

At time of writing the GBP/USD exchange rate is around $1.1902, a 1% plunge from this morning’s opening levels.

Pound (GBP) Pressured by Political Headwinds and Dovish BoE

The Pound (GBP) could be set to slide further as the political uncertainty that has plagued the UK for months is set to continue as the Conservative party look to elect a new leader. With an already-packed race for the position of Prime Minister, the Conservative party is expected to announce a new executive today, paving the way for the new PM election process.

Elsewhere, the dovish repricing of the Bank of England’s (BoE) rate expectations could also weigh on the Pound. As the central bank continues to juggle soaring inflation and a looming recession, a more cautious approach could deter investors.

BoE Governor Andrew Bailey is expected to appear before the Treasury Committee today and tomorrow. MPs will question Bailey and other members of the Financial Policy Committee (FCP) on the Financial Stability Report, published last week. In the report that outlined how the UK economy had ‘deteriorated materially’, just how the BoE plans to the UK economy back on track will be heavily scrutinised.

Meanwhile, UK GDP is set to print on Wednesday, and an expected stalling of growth could exacerbate the already grim domestic outlook.

US Dollar (USD) Bolsters ahead of Inflation Reading

The US Dollar (USD) is continuing its relentless rise against most of its peers as safe-haven flows persisted amid a looming global recession. With US inflation data released this week, an expected jump will only increase bets of further aggressive rate hikes from the Federal Reserve.

Meanwhile, the release of non-farm payrolls on Friday showed a rise by 372,000 in June, beating out an expected 268,000. The perceived resilience of the US economy all but confirm another 75bps rate hike in the July policy meeting, boosting investors’ spirits amid a continued hawkish Federal Reserve.

Elsewhere, with Covid cases on the rise in Shanghai once again, markets are concerned over China’s zero-Covid policy. Another slowdown in the world’s second largest economy only serves to fuel fears of a global recession, boosting the safe-haven ‘Greenback’ as risk-averse sentiment persists.

Comments are closed.