GBP/USD Exchange Rate Falls as US Dollar is Boosted by Safe-Haven Demand
The Pound to US Dollar (GBP/USD) exchange rate fell by -0.2% today as the ‘Greenback’ continues to benefit from a surge in safe-haven demand as US-China trade tensions intensify. The pairing is currently trading around $1.22.
The US Dollar (USD) soared on market demand for safe-haven currencies after US President Donald Trump wondered aloud what would happen should the US just ‘cut off the whole relationship with China’.
Trump also added that he would be ‘looking at’ Chinese companies listened on the US stock markets to see if they were following US accounting rules. As a result, ‘Greenback’ investors are fearing force de-listings which could flare-up tensions between the world’s two largest economies.
China’s state-backed Global Times stated in an editorial:
‘Such lunacy is a clear by-product, first and foremost, of the proverbial anxiety that the US has suffered from since China began its global ascension.’
Looking ahead to this afternoon, the release of the US Michigan Consumer Sentiment Index for May could put in a dent in the US Dollar’s gains. The figure forecast to fall from 71.8 to 68.
Today will also see the release of April’s US Retail Sales report, which is expected to fall by -4.6% as the coronavirus ravishes the American retail sector. As a result, we could see some of the ‘Greenback’s gains compromised by a dimming economic outlook.
Pound (GBP) Falls as UK-EU Brexit Talks to Conclude Today
The Pound (GBP) struggled to gain on the ‘Greenback’ today despite the Bank of England (BoE) Governor Andrew Bailey’s reiteration that it would not take its interest rates below zero. Though Bailey did hint at the BoE ramping up its stimulus programme.
Mr Bailey said on Thursday:
‘It’s always wise, and particularly in these circumstances, not to rule anything out for ever. It is not something we are currently planning for or contemplating.’
However, Sterling has struggled from rising anxieties over UK-EU Brexit talks, which are due to complete today. With media reports of significant sticking points between the two powers, markets have remained wary of the Pound on fears of a no-deal Brexit.
Furthermore, relations between the UK and the EU have been tense after the UK complained that the EU is failing to attend to the rights of British citizens living in its member states.
As a result, the Pound (GBP) has remained subdued on growing fears that the UK could face further economic uncertainty.
GBP/USD Forecast: Could Rising UK Unemployment Further Weaken Sterling?
Looking ahead to next week, Pound investors will be paying close attention to the UK ILO Unemployment Rate for March. If this soars above forecast, then we could see Sterling suffer on rising fears for the British economy.
Meanwhile, US Dollar (USD) traders will be awaiting the Federal Reserve Chairman, Jerome Powell, to testify before Congress. Any dovish comments about the American economy would prove USD-negative.
The GBP/USD exchange rate will remain sensitive to US-China trade developments next week. However, if tensions between the two superpowers ease off, then we could see the ‘Greenback’ suffer from a safe-haven sell-off.