Pound to Dollar (GBP/USD) rates have fallen back towards 1.30 this week, with the Pound weakening following last week’s decision by the EU to grant the UK an extended Brexit deadline.
The markets seem underwhelmed by the latest developments, which is no great surprise, when you consider it only serves to highlight the UK’s on-going inability to agree a Brexit deal with the EU.
Pound to struggle against the US Dollar until there is Brexit clarity
One positive is that at least the extension removes the threat of a no-deal scenario for the time being but until there is some longer-term clarity, I fear the Pound could struggle to make any significant impact against the greenback.
Whilst the Pound is likely to find support just above 1.30, this key threshold for the GBP/USD rate is once again likely to be tested based on the downward trend of recent days.
The US Dollar remains well supported despite concerns over the potential fallout for the US economy, in relation to the on-going trade standoff with China.
Are US recession predictions off the mark?
Many of the early year forecasts had indicated that the US economy could be set for a recession during the second half of 2019, a bold claim considering how well the US economy has performed in recent times.
Whilst their accelerated growth has slowed, the majority of the economic data being released from the US indicates a robust economy, supported no doubt by low unemployment figures and strong Gross Domestic Product (GDP) data.
Whilst President Donald Trump is never far from controversy, he has managed to refrain from any political implosions of late. Many of his economic decisions seem to be helping to support the US Dollar around the current levels against the Pound.
How GBP/USD rates evolve from here will likely be linked to any progress in Brexit talks but with the current outlook dovish at best, the Pound could be set for a further period of stagnation against the well supported US Dollar.
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