Pound to US dollar forecast: Sterling weakens as Brexit enters crucial week, will GBP/USD exchange rates fall further?

Pound to Dollar Rate Extends Gains

The pound to US dollar exchange rate began the day on the backfoot once again. GBP/USD rates saw a move below 1.23 on the interbank for the first time since 3rd October and lower than its recent highs (1.2413) at 1.2219 at the time of writing.

PM Boris Johnson defeated in latest court battle as No deal Brexit threat weighs heavily on Sterling

Boris Johnson’s latest court battle has failed to offer any certainty on a conclusion to Brexit this month, as a Scottish judge has rejected his attempt to block the need to request an extension to Brexit if he fails to secure a deal by October 19th. This means, in theory at least, that Johnson now only has 11 days to negotiate Britain through its divorce with the EU. This has increased the chances of an extension to January 31st 2020 for Brexit negotiations to continue, although does not rule out reaching a deal on the short term or a ‘no-deal Brexit’ entirely.

To date, the likelihood of a no-deal Brexit has put some significant pressure on the value of sterling against its currency counterparts, the muted impact of yesterday’s ruling on exchange rates could suggest that investors are beginning to suffer from political fatigue as the UKs divorce from the EU enters its 40th month.

Mixed US jobs report: What could the Fed’s next interest rate decision be?

Friday saw the release of a mixed jobs report from the US as the Nonfarm payroll showed 136,000 jobs were created in the US over the month of September a fair slip from the average of 161,000 jobs per month from 2019 so far. However, overall unemployment levels in the US now sit at a low of 3.5pc, the lowest level since 1969. The mixed picture lacks clarity on the next move on interest rates from the Federal Reserve at the end of October as the global economic cooling has already forced their hand. Could there be a third interest rate cut?

US China trade talks to recommence this week: Chances of a deal unlikely

Globally, US China trade talks commence once again this week, but chances of a deal remain relatively low as we learn today that the US has blacklisted Chinese technology companies over alleged human rights abuses just days before talks are set to resume. Hints from China suggest some retaliation may take place adding to the tensions already seen between the world’s two largest economies.

The USD continues to strengthen as it benefits from its status as a safe haven commodity, amidst high levels of uncertainty investors seek to hold a safer asset to ‘weather the storm.’ While interbank exchange rates sit below the 1.2250 pivot, the next target on the downside is the psychological 1.20 mark versus GBP. If you have an upcoming currency transfer or would like to learn more about the influences on GBP/USD rates, feel free to contact our currency specialists using the form below.