Jonathan Haskel Talks Pound (GBP) Exchange Rates down – Sterling Outlook Encumbered
The outlook for the Pound US Dollar (GBP/USD) exchange rate came under pressure on Tuesday as investors responded to comments from Economics Professor Johnathan Haskel – soon to be replacement of Monetary Policy Committee (MPC) member Ian McCafferty at the Bank of England (BoE).
Mr Haskel seemed to lean towards the dovish end of the spectrum, arguing that he saw risks if the central bank raises rates too quickly and that Brexit, global trade concerns and overarching uncertainty were ongoing threats to the UK’s economic outlook.
The soon-to-be policymaker argued that Brexit might cause a ‘temporary lull in the economy’ though, conversely, he also acknowledged that the interaction between trade and the growth of the British economy remained unclear, and that estimates are ‘rather tentative’.
On trade, Mr Haskel argued that protectionism could breakout into a ‘widespread trade war’, and that he would be very concerned for the state of the UK economy if that were to occur.
These perspectives contrasted that of known hawk Ian McCafferty – one of the three voters for an immediate rate rise at the previous policy meeting – and ultimately left Sterling trading half a cent lower.
US Dollar (USD) Exchange Rates UP as US Manufacturing Smashes Expectations
The US Dollar (USD) traded broadly higher on Tuesday as investors responded to the recent Dallas Fed manufacturing index release, which printed far beyond expectations.
The index – a measure of manufacturing activity and sentiment – scored 36.5 in June, up from the previous period’s 26.8 and the forecast contraction of 24.9.
Meanwhile, the company outlook index increased five points to 33.2 – its highest level since 2006.
These robust results indicated that expansion in Texas factory activity continued in June, with global trade concerns having little-to-no effect on momentum.
Beyond this, new US home sales in May saw a substantial 6.7% increase in the May period, up from the previous period’s contraction of -3.7% and the forecast of 0.8%.
Combined, this news only added to the ‘Buck’s current surge, with ongoing strength in GDP growth, inflation and the labour market favouring USD bulls.
Pound US Dollar (GBP/USD) Exchange Rate Forecast: US Consumer Confidence and EU Council Summit in the Spotlight
The Pound US Dollar (GBP/USD) exchange rate could encounter greater volatility today and later in the week as investors respond to the June US consumer confidence reading and the looming EU Council summit.
Analysts currently expect the US consumer confidence reading to hold at highs of 128, but a better-than-expected result could drive the ‘Greenback’ higher.
Looking slightly further ahead; investors will be paying close attention to the EU Council summit, due to start on Thursday, with markets desperately looking for any sign of progress in Brexit negotiations
If the deadlocks remain – particularly on the subject of the Irish border – then it could perceivably push the UK closer towards a cliff-edge exit – a prospect that is anathema for many investors due to the high degree of uncertainty involved.