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Pound US Dollar Exchange Rate Outlook: GBP/USD Creeps Higher as May Heads to Brussels

December 12, 2018 - Written by John Cameron

UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate edged higher on Thursday amid a sense of cautious optimism as Prime Minister Theresa May headed to Brussels after surviving a vote on no-confidence on Wednesday.
May will be seeking greater assurances regarding temporary nature of the Irish backstop, when she speaks to her European counterparts this evening at a summit of EU leaders, with GBP investors on the lookout for any positive developments.

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Advances 1.6%

GBP/USD marched higher on Wednesday ahead of the vote of no confidence against PM Theresa May. GBP/USD hit a high of $1.2671 after rallying by over 1%. Today’s US inflation data revealed a modest increase in consumer price pressures on the year, with an annual increase of 2.2% in November vs. 2.1% in October.

GBP/USD Exchange Rate Rises despite Theresa May Facing Vote of No Confidence

The Pound Sterling US Dollar (GBP/USD) exchange rate is up today, and is currently trading at $1.2528, despite British Prime Minister Theresa May facing a vote of no confidence from Tory MPs tonight.

GBP was strengthened slightly by yesterday’s release of the average earnings figures for October, which showed a better-than-expected increase, rising to a 10-year high.

These were followed by a decrease in claimant count change figures for November.

The US Dollar, meanwhile, remained in a state of volatility yesterday with the renewal of trade tensions between the US and China dampening confidence in the ‘Greenback’.

Yesterday also saw the release of a slew of US data states, most notably of which was the NFIB business optimism index for November which showed a decrease to 104.8 against last month’s 107.4.

However, USD found support today with reports that China may cut US car tariffs by 15%, arriving at a crucial time when US-China trade tensions were looking likely to flare up again.

Pound Gains on the ‘Greenback’ as Brexit Concerns Stall UK Markets

The Pound (GBP) gained ground on the US Dollar (USD) today despite Conservative MPs triggering a vote of no confidence against Theresa May, following 48 letters being received by the 1922 Committee of Conservative backbenchers.

David Gauke, the Secretary of State for Justice, commented:

‘If she loses tonight, whoever is prime minister will have to delay article 50 … I think that some of my leave colleagues should bear that in mind when they vote this evening.’

With Brexit in a state of flux as Theresa May’s position as Prime Minister is called into question, markets have remained extremely cautious, leaving the Pound (GBP) effectively rudderless until further developments clarify the UK’s position.

Tomorrow will see the release of the RICS Housing Price Balance survey for November, which is expected to decrease by -9% against last month’s -10%, and potentially dampening traders’ confidence in the Pound.

US Dollar to Pound Sterling (GBP/USD) Exchange Rate Down as Trade Tensions Cause Concern

The US Dollar (USD) meanwhile has been suffering from a lack of confidence as US-China trade tensions once again flared up after last week’s arrest of tech giant Huawei’s Chief Financial Officer, Meng Wenzhou.

However, after China has reportedly agreed to cut its US car tariffs by 15%, this has eased fears of a US-China fallout.

US President Donald Trump tweeted yesterday:

'Very productive conversations going on with China! Watch for some important announcements!'

Today, however, will see the release of a raft of US data stats which may affect the GBP/USD exchange rate, most notably being the release of November’s consumer price index which is expected to increase.

Later on today will also see the release of the monthly budget statement for November, which is expected to be bearish.

GBP/USD Outlook: Theresa May’s Future Position in Focus

The Pound US Dollar (GBP/USD) exchange rate is likely to remain fixated on political developments this week, with Brexit thrown into a state of further uncertainty after Theresa May’s future as Prime Minister has been called into question.

GBP investors will be paying close attention to any signs that Theresa May will be ousted as Prime Minister, as this could delay the Brexit process and cause further uncertainty for the Pound.

Thursday will see the release of US continuing jobless claims figures for November, which are expected to increase, potentially dampening trader confidence in the ‘Greenback’.

Friday will see the release of a raft of US ecostats, with the most important being retail sales figures for November, which are expected to show a decrease.

These will be followed by the release of November’s manufacturing and services PMIs, with traders paying close attention to any signs that there has been an uptick in activity.

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