February 28, 2019 - Written by John Cameron
STORY LINK Pound Canadian Dollar (GBP/USD) Exchange Rate Falls as US-North Korea Summit Breaks Down
GBP/USD Exchange Rate Falls as US Dollar Safe-Haven Demand Returns
The Pound US Dollar (GBP/USD) is down today and is currently trading around $1.3284 on the inter-bank market.
The US Dollar (USD) gained on the Pound (GBP) today following the surprise early breakdown of the US-North Korea summit. US President Donald Trump and North Korean Leader Kim Jong-un failed to come to a consensus, with both leaders walking away.
Andray Abrahamian, an expert on North Korea at Stanford University, commented:
'From Mr Trump's perspective it will be a loss he can weather… A 'bad deal' in which he gave away a lot would inspire years of debate and pushback from US foreign-policy elites. With this, he's spun it as saveable through working-level talks.’
USD benefited from its safe-haven status today, with risk appetite diminished following the failed talks.
These gains were clipped, however, by weak US economic data releases today, with the annualized GDP figures for the fourth-quarter slipping to 2.6% against the previous year’s 3.4%. US continuing jobless claims figures also increased, disappointing many ‘Greenback’ traders.
The Pound weakened against USD today despite hopeful GfK consumer confidence figures for February coming out better-than-expected at -13 against January’s -14.
Joe Stanton, a Client Strategy Director at GfK, remained optimistic, saying:
‘Despite a slowdown in overall growth and concerns about the impact of Brexit uncertainty on the UK economy, topline consumer confidence is stable again this month.’
GBP/USD Exchange Rate Slips as Brexit Optimism Sobers Up
Sterling has struggled to hold on to yesterday’s gains following the House of Commons vote in which saw Labour MP Yvette Cooper’s amendment overwhelmingly succeeds, further lowering the chances of a no-deal and heightening the likelihood of a second-referendum.
Nevertheless, many GBP traders are remaining cautious today as Prime Minister Theresa May once again has to rally to gain support for her withdrawal agreement, and with the possibility of the EU failing to grant an extension to Article 50, this has continued to haunt UK markets.
German Chancellor, Angela Merkel, has expressed her support of an extension, however she put emphasis the conditions, saying:
‘If Britain needs some more time, we won’t refuse but we are striving for an orderly solution.’
French President Emmanuel Macron also expressed his agreement with a possible extension, although added:
‘[W]e would in no way accept an extension without a clear objective.’
GBP/USD Forecast: Pound Could Rise if May’s Deal Gains Traction
GBP traders will be looking ahead to tomorrow’s publication of the UK’s Markit manufacturing PMI figures for February, which are expected to decrease.
Tomorrow will also see a raft of US data releases with many ‘Greenback’ traders focusing on the US retail sales figures for January, and with any signs of an increase this could bolster the USD/GBP exchange rate further.
The Chair of the Federal Reserve, Jerome Powell, will also be giving a speech tomorrow, and with any bullish comments about the US economy this could further strengthen the US Dollar against the Pound.
The GBP/USD exchange rate is likely to be dictated by Brexit developments for the rest of the week, however, and with any indication that Theresa May’s withdrawal deal is gaining traction amongst MPS, this could see the Pound rise.
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