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Pound US Dollar (GBP/USD) Exchange Rate Muted as US Consumer ‘Gradually Fading’

Pound Sterling US Dollar (GBP/USD) Exchange Rate Flat as US Retail Sales Rebound

The Pound Sterling US Dollar (GBP/USD) exchange rate remained flat on Friday, trading at around $1.2903.

On Friday afternoon, data revealed that while US retail sales rebounded in October, shoppers cut back on big-ticket items.

The US Commerce Department showed that sales increased by 0.3% thanks to motor vehicle purchases and higher gasoline costs.

This reversed September’s slump of -0.3%, the first decline in seven months.

Core sales rebounded, supporting signals from the US Federal Reserve that interest rates will not be cut again in the near-term.

In recent months the US consumer has driven the economy, and today’s data suggests this may continue.

Commenting on this, chief US economist at Societe Generale SA, Stephen Gallagher said:

‘It’s not screaming softness on the consumer but the consumer is gradually fading. We’re more dependent on the consumer than ever in this expansion, and we’re getting some signs the consumer is slowing.’

US Dollar (USD) Muted as US-China ‘Mood Music is Pretty Good’

At the end of the week, the Dollar was supported an increase in US-China trade hopes.

White House economic adviser, Larry Kudlow said that they were getting close to a deal, and while he did not reveal any new details on talks, he said the ‘mood music is pretty good’.

Commenting on this, Terence Wu, treasury strategist at OCBC Bank in Singapore, noted:

‘It may not be a game-changer. Thus, we think any reversal in the risk-off trades may not see a good shelf-life.’

However, the US Dollar was left flat against the Pound as the Financial Times reported an agreement may not be reached in time to stop the fresh round of tariffs on 15th December.

Sterling (GBP) Flat as Election Optimism Distracts

The Pound continued to receive support from Monday’s comments from Brexit Party Leader, Nigel Farage.

The Brexit Party leader revealed his party would not contest the 317 seats the Tory Party won in the 2017 general election, which could lead the way for the Conservatives to secure a majority.

However, GBP remained flat as the election optimism could be distracting from wider market pessimism about the Pound’s long-term outlook.

The UK will only have 11 months to negotiate a trade deal with the EU if the country leaves the bloc at the end of January.

Commenting on this, Neil Mellor, senior currency strategist at BNY Mellon said:

‘My concern is – and this is something possibly the market has thought about – that we’ve got preoccupied with the election but there is still a lot of uncertainty post-election.’

Pound US Dollar Outlook: Will Election Optimism Buoy GBP?

Looking ahead to next week, the Pound (GBP) could edge up against the US Dollar (USD) if election optimism continues.

If there are further surveys showing that the Conservatives are ahead in the polls, it will likely give Sterling an upswing of support.

Meanwhile, if US-China trade tensions increase once again, it could dampen ‘Greenback’ sentiment.

If reports suggest relations between Washington and Beijing are strained, and a ‘Phase One’ trade deal being completed soon is unlikely, the Pound US Dollar (GBP/USD) exchange rate is likely to rise.