Surprise Manufacturing Index Improvement Limits GBP/USD Exchange Rate Upside
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate moderated its losses as MPs voted against granting a mini-recess for the Conservative Party conference.
However, as the Kansas Fed manufacturing index unexpectedly picked up in September this helped to keep the US Dollar on a positive footing.
With the US economy showing signs of resilience the GBP/USD exchange rate failed to return to an uptrend.
Political Anxiety Drags Down Pound Sterling US Dollar (GBP/USD) Exchange Rate
The Pound Sterling to US Dollar (GBP/USD) exchange rate extended its decline on Thursday as scenes in parliament stoked a sense of political anxiety.
With Boris Johnson resisting calls for his resignation fears of a potential early general election continued to grow, weighing heavily on Pound Sterling (GBP).
As hopes of any imminent progress on the matter of Brexit rapidly faded investors were left with little incentive to favour the Pound over its rivals.
Until markets see some degree of political certainty worries over the outlook of the UK economy look set to keep GBP exchange rates on the back foot.
US Dollar (USD) Exchange Rates Push Higher in Spite of Market Risk Appetite
Although market risk appetite picked up thanks to renewed hopes of a breakthrough in US-China trade relations this failed to weigh down the US Dollar (USD).
USD exchange rates remained on a solid footing even as the prospect of further Federal Reserve interest rate cuts continued to hang over markets.
With no change forecast from the second quarter’s finalised gross domestic product data confidence in the underlying health of the US economy may remain limited, however.
Focus is also set to fall on August’s advance goods trade balance with investors expecting to see the deficit widen on the month.
Evidence of a further weakening of US trade conditions could see the US Dollar come under pressure once again.
While the potential for progress towards a new US-China trade agreement remains any souring of relations between the two parties could easily put a dampener on USD exchange rates.
Lingering political pressure on the Federal Reserve to deliver more aggressive monetary loosening may also limit the strength of the US Dollar in the near term.
Lack of UK Consumer Confidence Forecast to Limit Pound Sterling (GBP) Strength
GBP exchange rates may stumble further on Friday, however, if September’s UK GfK consumer confidence index fails to impress.
With the index forecast to hold steady at -14 on the month confidence in the outlook of the UK economy could deteriorate further.
As strong levels of consumer spending have helped to support economic growth any signs of a slowdown may weigh heavily on the Pound.
Unless sentiment shows signs of improving, in spite of ongoing Brexit-based uncertainty, the GBP/USD exchange rate looks set to remain biased to the downside.
Political developments could easily overshadow even a positive consumer confidence index, though, as the Pound remains sensitive to events in parliament.
If the uncertainty over the UK’s political future persists in the days ahead this is likely to keep the Pound on the back foot.
With a little over a month now left before the current Brexit deadline a persistent lack of progress could see the GBP/USD exchange rate extend its slump further still.