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Pound Sterling US Dollar (GBP/USD) Exchange Rate Plummets to 28-Month Low

July 30, 2019 - Written by John Cameron

No-Deal Brexit Fears Send Pound US Dollar (GBP/USD) Exchange Rate to 28-Month Low

The Pound Sterling US Dollar (GBP/USD) exchange rate hit a 28-month low overnight as Brexit pessimism increased.

The pairing is currently trading at an inter-bank rate of $1.2186.

The Pound plummeted as fears the UK is headed for a chaotic no-deal Brexit increased.

Sterling losses accelerated since Boris Johnson became Prime Minister as he stated he would leave the EU with or without a deal by 31 October.

Added to this, since Johnson became Prime Minister, the Pound has shed around 2.4% of its value.

Johnson’s Cabinet of Brexiteers as well as his tough line with the European Union means the chances of a last-minute deal are slim.

Commenting on this, Yukio Ishizuki, foreign exchange strategist at Daiwa Securities stated:

‘No one wants to buy the pound now. The bottom has fallen out, and I’m not sure where is will stop. Uncertainty about Brexit is the main story. I don’t see how Johnson can get an agreement in place.’

US Dollar (USD) Rises as US-China Trade Talks Continue in Shanghai

Meanwhile, with very few visible signs in-person trade talks between the US and China in Shanghai kicked off.

Both sides seemed to play down expectations that these talks could lead to a quick end to the ongoing trade tensions.

Expectations for a breakthrough during this week’s talks continue to remain low as Washington and Beijing seem to be further apart than they were three months ago.

Face-to-face talks were led by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He.

This will also be the first time China’s Commerce Minister Zhong Shan participated in trade talks, who is seen as a hard-liner by American officials.

There was little local media coverage on Tuesday and according to Bloomberg the Chinese side will host a dinner at Fairmont Peace Hotel.

US Federal Reserve to Cut Interest Rates for the First Time in a Decade

The US Dollar rose against the Pound despite expectations the US Federal Reserve is going to cut interest rates for the first time in a decade.

The Fed are expected to cut rates by 25 basis points for the first time since the height of the financial crisis.

However, some economists expect a more aggressive 50 basis point cut because of last week’s weak business investment data.

Speaking to CNBC, Morgan Stanley’s Chetan Ahya believes the Fed needs to cut rates more aggressively:

‘When you think about the job market, right now the momentum is already slowing […] and the impact of the global slowdown will show further on the [capital expenditure] numbers, further on the job market. So if the Fed wants to be pre-emptive, it needs to cut 50 basis points.’

Pound US Dollar Outlook: Will Better than Expected US Consumer Confidence Buoy USD?

Looking ahead to this afternoon, the US Dollar (USD) could rise against the Pound (GBP) following the release of the US Personal Consumption Expenditure Price Index (PCE).

If PCE rises higher than forecast it could provide the Dollar with an upswing of support.

Meanwhile, later this afternoon the ‘Greenback’ could edge up further following the release of the US consumer confidence data.

If consumer confidence rises higher than forecast, the Pound US Dollar (GBP/USD) exchange rate could slide.

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