GBP USD under Pressure from Carney Comments and Brexit Woes

September 19, 2017 - Written by Ben Hughes

STORY LINK GBP USD under Pressure from Carney Comments and Brexit Woes

The Pound US Dollar exchange rate has come under pressure today in light of recent comments from Bank of England (BoE) Governor Mark Carney and a perceived divide within the Conservative Party.

BoE Carney Reigns in Rate Hike Excitement for GBP

BoE Carney recently took to the stage in Washington DC to assert that all changes to interest rates will be ‘limited’ and ‘gradual’ - a statement that curbed some of the recent enthusiasm from last week’s set of hawkish statements from the BoE.

He also asserted that Brexit could hurt Britain’s economic growth prospects in the short term, claiming that Britain would have to deal with the costs of reworking its trade relationships.

These comments quickly drew some ire, with various politicians asserting that the freedom to strike a new trade deal is one of the primary advantages of leaving the EU. Indeed, UK Secretary for Foreign Affairs Boris Johnson also made similar arguments in his recent essay in the Telegraph; something that many consider as a challenge against Theresa May’s leadership.

As a result, demand for Sterling quickly diminished, with many investors becoming anxious about the possibility of a growing divide within the Conservative Party.

Big Data, Theresa May’s Brexit Speech and the Consequences for GBP USD

Theresa May is due to give a speech in Florence on Friday regarding the future of the United Kingdom outside of the EU, though what form this might take remains questionable.

There are reports stating that if she reneges on the Brexit decision by opting for a ‘Swiss-style’ relationship then Boris Johnson will resign as Foreign Secretary; an event that would likely be deemed by investors as a positive thing for the Pound as it could, perhaps, shift the UK away from a ‘cliff-edge’ style divorce.

Alternatively, she could simply reinforce her current position and offer no means of reconciling the deadlock, something that would likely leave the Pound floundering.

Data relating to this pairing was limited to the US today and mostly arrived as somewhat of a mixed bag, with building permits leaping from 1230k in July to 1300k in August whilst the US current account deficit widened from $-113.5B to $-123.1B.

This news hurt the US Dollar somewhat, though not enough to swing things strictly into Sterling’s favour.

GBP USD Forecast: Fed Rate Decision on the Horizon

Markets are currently preparing for tomorrow’s big September rate decision from the US Federal Reserve, with many claiming that the Fed will announce the tapering of its bloated $4.2 trillion Dollar balance sheet and perhaps even hint at a rate hike sometime in December.

Indeed, whilst markets do not expect a rate hike this month, Fed Chair Janet Yellen is currently anticipated to express a hawkish sentiment regarding a transition towards tighter monetary policy in December, a move that would drive the GBP USD exchange rate into the ‘Greenback’s’ favour.

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TAGS: Pound Dollar Forecasts