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Pound US Dollar (GBP/USD) Exchange Rate Dips as May Threatened by ‘Trump-style’ Government Shutdown

US Dollar Currency Forecast

Pound US Dollar (GBP/USD) Exchange Rate Down despite Better-Than-Expected UK House Price Figures

The Pound US Dollar (GBP/USD) exchange rate is down today by over -0.2% and is currently trading within the region of $1.2760.

The Pound (GBP) failed to make any gains on the US Dollar (USD) despite the better-than-expected Halifax UK house prices for November showing an increase of 2.2% against October’s -1.2%.

Russell Galley, Managing Director at Halifax, commented:

‘This is slightly stronger than 2018, but still fairly subdued by modern comparison. However, this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of our forecast.’

The Pound has been further weakened by fears that Prime Minister Theresa May could face a defeat from the House of Commons in the coming weeks, following yesterday’s news that 200 MPs had filed a letter urging May to avoid the possibility of a ‘no-deal’ Brexit.

Today also saw the Labour Party support the cross-party amendment to limit tax in the event of a ‘no-deal’ Brexit, essentially forcing the UK Government to sideline the option of a ‘clean break’ Brexit scenario.

Sky News’s political correspondent Jon Craig, commented that such a threat ‘could starve the government of cash and create a Donald Trump-style shutdown’.

Later on today will see a raft of US data releases, with the most significant being the US trade balance figures for November which are expected to decrease.

These will be followed by the release of the US consumer credit change figures for November which are also expected to decrease, potentially allowing the Pound to make some gains on the US Dollar.

USD/GBP Exchange Rate Rises as US Dollar Traders ‘Wait and See’ Over US-China Trade Talks

The US Dollar gained on Sterling today, despite investors remaining generally cautious as talks between US President Donald Trump and China’s President Xi Jinping head into their second day.

Jasper Lawler, the Head of Research at London Capital Group, commented:

‘Traders are adopting a wait and see approach before deciding whether the latest round of [US-China] trade talks will be productive. . . Both sides are making encouraging comments that they are on the right track, and whilst that is offering some support to equities the markets know that we have been here before.’

The partial US government shutdown is also continuing to weigh on the ‘Greenback’, and with President Donald Trump set to deliver a TV address this evening – in which he is due to address the funding for the Mexican border wall – any further signs of a divide between the US Government and Congress could give Sterling a leg-up into Wednesday.

GBP/USD Exchange Rate Outlook: Brexit Volatility Likely

GBP traders will be looking ahead to tomorrow as the House of Commons is set to return to discuss Theresa May’s Brexit deal, and with any signs of an increasing divide between Parliament and the Government increasing, Sterling could see further losses against the ‘Greenback’.

Tomorrow will also see the Bank of England Governor Mark Carney deliver a speech with any signs of bearishness or negative comments about the British economy in the wake of a possible ‘no-deal’ Brexit scenario potentially hitting Sterling.

USD traders, meanwhile, will be awaiting any signs of bullishness from Raphael Bostic, an American academic and member of the Federal Open Market Committee, who will be speaking tomorrow. As a known dove, however, Bostic may cause some concern for ‘Greenback’ investors.

Looking further ahead, the GBP/USD exchange rate is expected to face further volatility as Brexit debates heat up tomorrow, with investors becoming increasingly skittish over any signs of a possible failed vote next week.