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Pound to US Dollar Exchange Rate Sinks as Donald Trump is Discharged from Walter Reed Hospital

October 6, 2020 - Written by John Cameron

GBP/USD Exchange Rate Falls as Hopes of US Stimulus Boost ‘Greenback’

The Pound to US Dollar (GBP/USD) exchange rate fell by -0.4% today, with the pairing currently fluctuating around $1.293.

The US Dollar (USD) rose against Sterling today despite US President Donald Trump being discharged from hospital to return to the White House following treatment for Covid-19.

However, the ‘Greenback’ has been provided a boost from news that US Lawmakers could soon agree on new stimulus measures to blunt the economic impact of the coronavirus pandemic.

Masafumi Yamamoto, the chief currency strategist at Mizuho Securities, commented:

‘I think hopes of U.S. stimulus are the main driving force.

‘As for Trump’s discharge, the impact is not clear-cut but it is seen as positive for risk environment to the extent that there are less worries about the White House getting caught in complete chaos and unable to make decisions.’

USD investors will be looking ahead to today’s speech from the Federal Reserve’s Chairman Jerome Powell.

If Mr Powell is notably dovish about the US economy, however, the ‘Greenback’ could shed some of today’s gains.

Pound (GBP) Falls as Brexit Deal Hopes Fade as EU Parliament Warns ‘Time is Short’

The Pound (GBP) fell today after the European Vice President Maros Sefcovic said to the European Parliament that ‘time is short’ to reach a post-Brexit trade deal.

Sefcovic also criticised the controversial UK Internal Market Bill, saying it presented ‘a heavy blow to the British signature and reliability. Respecting agreements is first a matter of law, but also of trust and in good faith.’

As a result, Sterling investors are becoming increasingly jittery on the rising possibility of a no-deal Brexit later this year.

Meanwhile, in UK economic data, today saw the release of the latest Construction PMI for September. Although the figure rose to 56.8, GBP investors remain cautious about the UK economy going forward.

Elio Keer, an economist at IHS Markit, commented on the data:

‘Following August's slowdown, growth in UK construction activity rebounded strongly in September. There were faster increases in activity in both the housing and commercial sub-sectors, which more than offset a sharper decline in civil engineering work.’

GBP/USD Forecast: Could Souring UK-EU Relations Drag Down Sterling?

Pound (GBP) investors will be awaiting tomorrow’s release of September’s latest Halifax House Prices gauge. Any signs of improvement in the British economy – or economic confidence – would prove GBP-positive.

US Dollar (USD) traders will be eyeing President Donald Trump’s further health prognosis over the next few days. If his condition improves, then the ‘Greenback’ could weaken as risk-sentiment improves.

Tomorrow will also see the release of the FOMC Minutes. Any indications of the US economy lagging behind would spark a buy off of the safe-haven US Dollar.

The GBP/USD exchange rate will remain sensitive to Brexit developments this week. As a result, we could see Sterling sink if UK-EU tensions continue to escalate.

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