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Pound Sterling US Dollar (GBP/USD) Exchange Rate Left Flat as No ‘Bold’ Brexit Offer from EU

October 9, 2019 - Written by John Cameron

Pound US Dollar (GBP/USD) Exchange Rate Muted as EU Officials Deny Brexit Concession Reports

The Pound Sterling US Dollar (GBP/USD) exchange rate was left muted and the pairing is currently trading at around $1.2219.

Sterling was left under pressure as reports that the European Union was prepared to offer a major concession during Brexit negotiations were denied by officials.

A report from The Times said that the bloc was going to offer the Northern Irish assembly a mechanism that would allow them to leave the Irish backstop after a number of years.

The Democratic Unionist Party (DUP) and EU officials denied this report, with a senior EU diplomat dismissing it as ‘spin’ in negotiations.

The Pound was left dampened as another official stated that ‘no bold new offer is coming from the EU side at this stage’.

Commenting on this, Chris Scicluna, head of economic research at Daiwa Capital Markets said:

‘Sterling had fared better and rebounded this morning but is now falling back again.

‘This shows that there is a recognition that there isn’t a substantive breakthrough in the Brexit talks.’

US Dollar (USD) Left Flat as US Job Openings Slump to One-and-a-Half Year Low

On Wednesday, the US Dollar was left under pressure as data revealed that US job openings slumped to the lowest since March 2018.

US job openings unexpectedly fell in August, which underscored a slowdown in hiring across US employers.

While job openings fell to 7.05 million in August from 7.17 million in July, it still exceeds the 5.8 million Americans that are officially classed as unemployed.

However, the labour market remains generally tight and quits rates fell to 2.3% which suggests workers are more confident about job opportunities.

US-China Trade Tensions Leave USD Under Pressure

Tensions between the US and China increased overnight as just a day after the US Commerce Department blacklisted 28 Chinese companies over the mistreatment of Muslim minorities, the US angered Beijing once again.

While China dismissed the allegations as groundless, US Secretary of State Mike Pompeo said Beijing had instituted ‘a highly repressive campaign’.

The United States imposed visa restrictions on Chinese officials, causing hopes for a US-China trade deal to fade and providing a slight upswing of support for the safe-haven USD.

However, a US official ensured that high-level trade talks would still take place at the end of the week between the two sides.

US Dollar (USD) Flat as Fed Chair Signals the Bank is Open to Further Cuts

On Tuesday evening, the US Federal Reserve Chair, Jerome Powell signalled the bank was open to slashing rates further.

The Fed slashed rates for the first time in a decade in July, and once again in September.

Powell repeated that the bank would act ‘as appropriate’ in order to fend off global economic risks, and stated that he believes the US economy will continue to expand.

Commenting on this, Jason Ware, chief investment officer at Albion Financial Group stated:

‘It seems that Powell is trying to, in a soft way, demonstrate to the market that the Fed continues to be aware of the downside risks and is actively willing to support the economic expansion as needed.’

Following Powell’s comments, trade in the Dollar was wobbly, but manage to steady on Wednesday morning before the Pound US Dollar (GBP/USD) exchange rate was left muted in the afternoon.

Pound US Dollar Outlook: Will a Dovish Fed Weigh on USD?

Looking ahead to this evening, the US Dollar (USD) could slump against the Pound (GBP) following the release of the Federal Open Market Committee (FOMC) meeting minutes.

If the minutes reveal that the Federal Reserve is overly dovish, and policymakers are considering another rate cut, the ‘Greenback’ is likely to slide.

Meanwhile, the pairing could be left muted once again following the release of the UK’s GDP growth data.

If data reveals that in the three months to August growth stagnates or contracts, it is likely the Pound US Dollar (GBP/USD) exchange rate will be left flat.

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