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Pound US Dollar Exchange Rate Rises, Markets React Positively to Tory Manifesto

November 25, 2019 - Written by John Cameron

GBP/USD Exchange Rate Edges Higher, Tories Maintain Lead in Opinion Polls

The Pound US Dollar (GBP/USD) exchange rate rose by 0.5% today, with the pairing currently trading around $1.290 after markets reacted generally positively to the Conservative’s release of its long-awaited manifesto on Sunday.

Josh Hardie, deputy director-general at the Confederation of British Industry (CBI), was positive about business’s response to the Conservatives ‘pro-enterprise vision’ and focus on ‘infrastructure and reaching net zero’.

However, Mr Hardie warned:

‘But the inconvenient truth remains: sustainable economic growth will be risked if there is a needless rush for a bare-bones Brexit deal that would slow down our domestic progress for a generation.’

Sterling rose against the US Dollar as the Conservatives have maintained their lead in the opinion polls ahead of the 12th December general election.

In UK economic data, today saw the release of the CBI’s distributive trade survey for November, which showed an improvement in retail sales ahead of the Christmas period.

Anna Leach, Deputy Chief Economist at CBI, said:

‘Retailers are entering the festive season with a bit of hope that sales will head up, with the strongest expectations in half a year… But Brexit uncertainty continues to weigh on investment plans for the year ahead which remain weak.’

USD/GBP Exchange Rate Falls as US-China Trade Deal Optimism Weakens ‘Greenback’

The US Dollar (USD) fell against the Pound (GBP) following today’s release of October’s US Chicago Fed National Activity Index, which fell below forecasts from -0.45 to -0.71 and heightened concerns of America’s economic health.

Meanwhile, improving US-China trade deal optimism has weakened safe-haven demand in the ‘Greenback’, with investors fleeing for riskier assets and the world’s two largest economies hint at a possible ‘phase one’ trade deal.

Analysts at Reuters commented:

‘U.S. President Donald Trump and Chinese counterpart Xi Jinping on Friday expressed a desire to sign an initial trade deal and defuse a 16-month tariff war that has lowered global growth.’

However, ongoing events in Hong Kong are weighing on progress between the two superpowers, with Beijing perceiving Washington as intervening in Chines affairs after the passing of the HK bill by the US Senate.

GBP/USD Outlook: UK Political Developments in Focus

US Dollar investors will be looking ahead to tomorrow’s speech by Jerome Powell, the Chairman of the Federal Reserve. Any dovish comments about the health of the American economy, however, could see the USD/GBP exchange rate sink further.

Tomorrow will also see the release of the US housing price index for September, which is expected to hold at 0.2%.

Sterling traders will be looking ahead to tomorrow’s publication of October’s BBA mortgage approvals figure, with any signs of improvement likely to boost investor confidence in Sterling.

The GBP/USD exchange rate will continue to be driven by British political developments, with any signs of the Tories consolidating their lead against the Labour Party boosting Sterling on a sense of returning political certainty ahead of December.

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