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Pound US Dollar (GBP/USD) Exchange Rate Rises as US Recession Fears Increase

August 12, 2019 - Written by John Cameron

GBP/USD Exchange Rate Edges Higher as Recession Fears Haunt US Markets

The Pound US Dollar (GPB/USD) exchange rate edged higher today, leaving the pairing trading around $1.209 as US economic recession fears rise as US-China trade tensions mount.

The US Dollar (USD) eased against the Pound (GBP) as tensions between the US and China are expected to drag on, potentially weakening the US economy in the near-term.

Economists at Goldman Sachs have increased fears that the US economy could face a recession if the US fails to secure a trade deal with China. They said:

‘We expect tariffs targeting the remaining $300bn of US imports from China to go into effect. Overall, we have increased our estimate of the growth impact of the trade war.’

Jan Hatzius, Goldman Sach’s chief economist added:

‘Fears that trade war will trigger a recession are growing.’

However, with China recently limiting the Chinese Yuan and thus gaining a competitive advantage along with Beijing’s halting of purchases of US agricultural products, we could see the US Dollar sink further on increased economic uncertainty.

GBP/USD Exchange Rate Increases despite No-Deal Brexit Fears

Sterling recovered from last week’s lows as UK data has taken backseat today, with traders instead focusing on headlines concerning Brexit.

Today saw the news that Conservative rebels could attempt to block a no-deal Brexit in the second week of September, with the EU unlikely to engage with the UK on negotiations until the UK’s domestic battles have concluded.

Justice Secretary Robert Buckland commented:

‘[The prime minister] wants to achieve a deal but if we cannot achieve a deal then it needs to be as orderly a Brexit as possible – that is why the work of government at the moment is focused hugely on that effort.’

Pound traders have also become increasingly jittery after the Irish Prime Minister Leo Varadkar ruled out renegotiating the Irish backstop with Prime Minister Boris Johnson in early September meetings.

A spokesman for the Irish government said:

‘As has repeatedly been made clear, the withdrawal agreement and the backstop are not up for negotiation. Any discussions on changes to the political declaration would occur between the UK and the EU.’

GBP/USD Outlook: UK Unemployment and Wages Figures in Focus

Pound investors will be looking ahead to tomorrow’s publication of the UK’s ILO unemployment rate figure for June, which is expected to hold at 3.8%.

Meanwhile, UK average earnings, which are also due out tomorrow, are expected to improve from 3.4% to 3.7%.

Tomorrow will also see the release of the US inflation figure for July, which are forecast to remain at 2.1%.

The GBP/USD exchange rate is likely to fall later this week as Brexit concerns will begin to weigh on market confidence Sterling.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts Pound Sterling Forecasts

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