November 18, 2020 - Written by John Cameron
STORY LINK Pound to US Dollar (GBP/USD) Exchange Rate Edges Higher Despite Concerns for UK Economy
GBP/USD Exchange Rate Rises Despite Worries Over No-Deal Brexit
The Pound to US Dollar (GBP/USD) exchange rate rose by 0.2% today, with the pairing currently trading around $1.329.
Sterling rose against the ‘Greenback’ following today’s publication of the UK Consumer Price Index for October, which beat forecasts and rose by 0.7% year-on-year.
Tom Stevenson, an investment director at Fidelity International, commented:
‘While prices are on an upwards path, rises are likely to be subdued for a while longer. Covid infections are still increasing, large swathes of the UK are under strict lockdown rules, restricting opportunities to spend, and unemployment is climbing.’
However, with Brexit being largely uncertain as UK-EU trade talks continue without any signs of a clear decision, GBP investors are remaining cautious.
Added to this, reports have also suggested that the EU could sign off a Brexit trade deal as late as December 28th.
Furthermore, the accountancy firm KPMG warned that Britain’s economy could suffer a serious setback if a post-Brexit deal fails to manifest.
Yael Selfin, chief economist at KPMG commented:
‘There will be changes even with a deal, but the initial destruction next year would be sharper without one. We’re hopefully out of the woods when it concerns Covid, but we must still remember the UK is entering another period where there is still going to be some sort of a shock.’
US Dollar (USD) Sinks as US Sees Rise in Covid-19 Cases
The US Dollar (USD) fell today following reports of soaring Covid-19 cases throughout much of the United States.
Consequently, this has sparked concern for America’s economy, which could be set for a severe downturn as the year draws to a close without signs of a stimulus package.
In US economic data today saw the release of October’s US Housing Starts beat forecasts and rise to 1.53 million.
Analysts at Reuters commented on the data:
‘U.S. homebuilding increased more than expected in October, suggesting the housing market continues to be sustained by record low mortgage rates even as the economic recovery shows signs of strain amid a resurgence in new COVID-19 infections.’
Meanwhile, demand for the safe-haven ‘Greenback’ slipped this week owing to growing hopes for a Covid-19 vaccine.
As a result, the US Dollar has suffered with investors instead seeking out riskier assets optimism grows for a global economic recovery.
GBP/USD Forecast: Could Rising US Unemployment Drag on the Dollar?
US Dollar (USD) investors will be awaiting tomorrow’s release of the US Continuing Jobless Claims and Initial Jobless Claims reports for October.
Any sudden rise in US joblessness would also bode badly for the US economy and could weigh on investors’ confidence in the ‘Greenback’.
Meanwhile, hopes of a Covid-19 vaccine could continue to drag down safe-haven demand for the US Dollar.
Sterling traders will be looking ahead to Friday’s economic data, which will include retail sales and consumer confidence.
If the UK economy shows signs of struggling, then we could see the GBP/USD exchange rate suffer.
Brexit will continue to drive the Pound, however, so any signs that Downing Street failing to concede on a trade agreement with the EU would prove GBP-negative.
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TAGS: American Dollar Forecasts Pound Dollar Forecasts