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Pound Sterling (GBP) to US Dollar (USD) Trends Near 31-Year-Lows This Week

January 11, 2017 - Written by Toni Johnson

The Pound to US Dollar exchange rate slipped from its best levels on Thursday afternoon and fell below the week’s opening levels once again.

Sterling became jittery as it was confirmed that UK Prime Minister Theresa May would hold her major Brexit speech next Tuesday. Markets fear May will confirm that she will not be seeking single market access as part of the Brexit process.

[Previously updated 10/01/2017]

The Pound to US Dollar exchange rate has failed to recover this week despite the US Dollar’s strength fading this week, as Brexit news and UK data keeps Sterling highly pressured.

GBP/USD began the week trending at 1.2288 but almost immediately lost over a cent in value when markets opened on Monday. The pair hit a 31-year-low of 1.2112 on Wednesday morning.

Pound (GBP) Recovery Limited by Considerable UK Deficit Widening

Sterling plummeted at the beginning of the week as traders reacted to the weekend’s Brexit comments from UK Prime Minister Theresa May. May had stated in an interview with Sky News that the UK would not simply be able to keep ‘bits’ of EU membership, adding to ‘hard Brexit’ fears.

The Pound stopped being sold off on Tuesday morning and in the evening it was buoyed by comments from Labour leader Jeremy Corbyn, who announced the Labour party fully supported keeping access to the single market if possible.
On Wednesday, Sterling continued to trend with a downside bias despite having recovered from its worst levels. The day’s solid manufacturing and industrial production figures failed to offer Sterling much support, as the UK’s November trade deficit figures were far worse than anticipated.

The trade balance result was expected to worsen to around -£3.5b, but instead plunged from a revised score of -£1.55b to -£4.17b.

US Dollar (USD) Firms Ahead of Trump Press Conference

Traders began to adjust their levels on the US Dollar on Wednesday morning as markets anticipated the day’s upcoming press conference from US President-elect Donald Trump.

In Trump’s first news-focused conference since July 2016, some analysts predict uncertainty over the short to long-term future of the US economy could be either lifted or worsened. As a result, demand for the US Dollar was mixed on Wednesday.

Tuesday’s US ecostats supported the US currency slightly. This included November’s final US wholesale inventories results which beat expectations of 0.9% and came in at 1%.

GBP/USD Forecast: US Data Could Influence Exchange Rate

The majority of the week’s influential UK ecostats have now been published and did not offer Sterling any substantial support as the Pound’s exchange rates continue to see a generally downside movement during Wednesday’s European session.

With Brexit jitters and uncertainty only likely to worsen until a solid position is announced by the UK government, demand for Sterling could remain weak and GBP/USD could remain near its worst levels in over three-decades.

However, news emerged on Wednesday that UK ministers expect the Supreme Court to decide that the UK government activating Article 50 without Parliamentary procedure would not be proper, which could give the Pound some support if confirmed.

Thursday’s data includes some influential US ecostats, including the latest jobless claims as well as December’s budget statement. Friday will see even more influential reports coming in, including December’s advance retail sales and January’s preliminary Michigan confidence index.

USD investors may also react to any emerging comments or developments from US President-elect Donald Trump ahead of his inauguration next week, especially if it shifts Federal Reserve interest rate hike bets in some way.

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