GBP/USD Exchange Rate Rises despite Downing Street’s No-Deal Brexit Plans
The Pound Sterling US Dollar (GBP/USD) exchange rate is up today, and is currently trading at $1.2612 despite Downing Street declaring it will escalate contingency plans for a possible no-deal Brexit.
The US Dollar (USD), however, while being recently strengthened by improving trade relations with China – by agreeing to remove tariffs on US car imports, and redacting its Made in China 2025 plan – has been capped by market caution over signs of a slowing global economy.
GBP, meanwhile, has remained somewhat weakened after Theresa May failed to make headway with the European Union (EU) last week, returning to the UK to face an increasingly fractious Parliament.
Today also saw the Secretary of State for Business, Greg Clark, comment that the House of Commons ‘should be invited to say what it would agree with’ with regard to Brexit, raising alarm amongst Sterling investors as May’s Brexit deal looks increasingly unlikely to pass a vote.
Pound US Dollar (GBP/USD) Exchange Rate Up as House Prices Slump
Today saw the release of the UK’s Rightmove house price index for December which showed a decrease of -1.5% following last month’s -1.7% drop.
The Pound (GBP) is likely to face further volatility, with Theresa May’s Brexit deal coming under increasing pressure from a Parliament that wants to wrest back control over the Brexit process, with Clark commenting that businesses ‘expect MPs to take responsibility rather than just be critics.’
May has come under increasing fire from her Labour opposition, with Jeremy Corbyn declaring her Brexit deal ‘dead in the water’ and that the Government had ‘utterly failed’ in its ‘attempts to deliver any meaningful changes.’
Looking ahead to Wednesday, the UK will see the publication of the Retail Price Index for November which is expected to dip.
USD/GBP Exchange Rate Dips despite Trump’s Expectations of Fed Rate Hike
The US Dollar (USD) benefited from its safe-haven status towards the end of last week, with the news that China had put out some poor manufacturing figures.
With expectations of further rate hikes from the Federal Reserve due on Wednesday, ‘Greenback’ investors have, however, remained bearish, weakening the USD/GBP exchange rate.
Meanwhile, US President Donald Trump tweeted:
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
— Donald J. Trump (@realDonaldTrump) December 17, 2018
Today also saw the publication of the NY Empire State manufacturing index for December which showed a worse-than-expected decrease, dampening sentiment in the US Dollar (USD).
This was followed by the release of the US NAHB housing market index for December, which also showed a decrease at 56 against last month’s 60.
GBP/USD Outlook: Brexit and China Remain in Focus
The GBP/USD exchange rate is likely to be partially driven by political forces in the coming week, with Brexit increasingly occupying Sterling investors’ attention as Theresa May struggles to gain support from Parliament for her UK-EU withdrawal agreement.
USD investors, meanwhile, will be paying close attention to any developments between the US and China, with any signs of compromise from either side bolstering market sentiment in the ‘Greenback’.
Wednesday will also see the release of the US Federal Reserve’s interest rate decision, which is expected to reveal a 25 basis point hike.
Following this will be the Federal Open Market Committee’s economic projections which will closely monitored by ‘Greenback’ traders for any signs of economic optimism for 2019.
Thursday, meanwhile, will see a slew of UK ecostats, most importantly of which will be the Bank of England’s (BoE) interest rate decision, with Sterling traders likely to be buoyed by any signs positive forward guidance in the absence of a rate hike.
Also on Thursday we will see UK retail sales figures for November which are expected to increase slightly on the month, potentially strengthening the GBP/USD exchange rate.
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