Pound US Dollar (GBP/USD) Exchange Rate Slides ahead of US GDP Readings

March 28, 2018 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Slides ahead of US GDP Readings

Fresh Irish Border Solution Imminent GBP/USD Exchange Rate Fails to Capitalise

The Pound US Dollar (GBP/USD) exchange rate fell on Wednesday, failing to capitalise on reports that a fresh solution to the Irish border conundrum could be near.

According to reports from The Times, Irish officials have been told to expect new plans from Downing Street ‘imminently’ on how to avoid a post-Brexit hard border.

Markets are desperate to hear a solution to this ongoing impasse, particularly with the EU pushing for Northern Ireland to remain within the customs union and the UK adamant that this is not an option.

British ministers have also indicated that these new plans are at a rather advanced stage following months of appeals from the Irish government for a sufficient, workable alternative.

If these solutions prove tenable then Sterling could find room to rally against the US Dollar, but until then, market anxieties are likely to continue.

Global Trade Tensions Ease as US, China Negotiate Tariffs – US Dollar (USD) Exchange Rates Climb

The ‘Greenback’ has found increased purchase this week on news that the United States and China are in the midst of negotiating trade, rather than sitting a hair’s breadth away from a global trade war.

Whilst the US is moving ahead with plans to impose tariffs targeting some $60bn worth of Chinese goods, markets were pleased to hear that neither China, nor US President Donald Trump want to engage in an outright trade war.

US Treasury Secretary Steven Mnuchin stated:

‘We are going to proceed with our tariffs. We are working on that. We’re also working on investment restrictions, but we’re simultaneously having negotiations with the Chinese to see if we can reach an agreement. We’re having very productive conversations with them. I’m cautiously hopeful we’ll reach an agreement’.

This news provided some respite for concerned investors, though until outright agreement is achieved, anxieties will likely remain bubbling beneath the surface.

Pound US Dollar (GBP/USD) Exchange Rate Forecast: US GDP in the Spotlight

The GBP/USD exchange rate could find room to recover today, depending on the performance of the latest US GDP reading.

According to the market forecast, the final US GDP growth rate reading for Q4 2017 is expected to print at 2.7%, down from the previous period’s 3.2%.

Beyond this, markets will be keen to assess the US advance goods trade balance result for February, with the deficit expected to shrink slightly from $-74.4b to $-74.1b.

This could help limit the negative response to a poor GDP reading, but the outlook for the GBP/USD exchange rate will largely be decided by progress, or a lack thereof in trade negotiations with China in the coming weeks.

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TAGS: Pound Dollar Forecasts