USD/GBP Exchange Rate Edges Higher as Brexit Woes Weigh on Sterling
The US Dollar Pound (USD/GBP) exchange rate is up today and is currently trading around £0.7725 on the inter-bank market.
The Pound (GBP) fell against the US Dollar (USD) despite the publication of the UK ILO unemployment rate figures for March falling below expectation to 3.8%.
This was attributed to a pre-Brexit hiring increase, which, as a result, saw the UK’s unemployment fall to its lowest since the mid-1970s.
Tom Stevenson, an Investment Director at Fidelity International, commented:
‘The murky outlook is leading businesses to hire now with the option to fire later rather than make irreversible investments in new kit. Perhaps it is still too soon to get ahead of ourselves, though – a week before new inflation data, there’s a question mark over how real the earnings growth is.’
However, the UK average earnings figures eased slightly in March to 3.3% against February’s 3.4%.
The US Dollar, meanwhile, has come under increasing pressure from the US-China trade row, with China threatening to raise tariffs on $60bn of US goods from the 1 June.
US President Donald Trump has increasingly called out China, tweeting:
‘China should not retaliate – will only get worse! … [They have] taken so advantage of the US for so many years.’
USD/GBP Exchange Rate Rises as Traders Await US Business Optimism Figures
Today will see the publication of the US NFIB Business Optimism Index for April, and with any signs of an increase – despite the US-China trade tensions – this could provide some much-needed market confidence in the ‘Greenback’.
With investors seeking out safe-haven currencies like the Euro, the US Dollar has generally struggled this week as the US-China trade war has left many USD traders feeling skittish.
Lindsey Graham, a Senator of South Carolina, has shown support for the US’s position in the trade war, saying:
‘I completely support President [Trump]’s approach in trade negotiations with China. This is the last, best chance for America and the world to get China to play by the rules.’
GBP/USD Exchange Rate Falls MPS Urge May against Labour Brexit Compromise
Pound traders are focusing on Brexit developments today, with Prime Minister Theresa May’s Chief Brexit negotiator, Olly Robbins, returning to Brussels to discuss the ongoing cross-party talks between the Labour and Conservative party.
A letter was compiled by former cabinet ministers, including the former Defence Secretary Gavin Williamson, urging Mrs May not to compromise with Labour over the customs union with the EU.
The letter stated:
‘We believe that a customs union-based deal with Labour will very likely lose the support of Conservative MPs like us who backed the withdrawal agreement in March (in many cases very reluctantly), and you would be unlikely to gain as many Labour MPs to compensate.’
This has continued to weigh on Sterling today, as there are no clear signs of a breaking of the Brexit deadlock between the two major parties.
USD/GBP Forecast: Sterling Could Sink Further on Brexit Stalemate
US Dollar traders will be looking ahead to tomorrow’s release of the US retail sales figures for April, which are, however, expected to ease.
These will be followed by a speech by Randal Quarles, a Vice Chair for Supervision at the Federal Reserve, and with any signs of dovishness about the US economy, this could see the ‘Greenback’ fall.
There are no UK data releases due tomorrow, with many Sterling traders focusing on Brexit developments instead.
The USD/GBP exchange rate could rise further if the UK’s Brexit situation shows little signs of changing, and with cross-party talks remaining generally gloomy, the Pound is likely to continue weakening.