Following a promising start to last week, the GBP vs USD rate began slipping lower, before experiencing its heaviest losses on Friday. The downward pressure on the pound was caused by a tightly contested head-to-head election debate on Tuesday and the unveiling of Labour’s “radical” election manifesto on Friday. The US dollar, on the other hand, advanced on the back of ongoing trade concerns and encouraging US data.
Boris Johnson Launches Tory Manifesto
Boris Johnson vowed to “get Brexit done” and “forge a new Britain”, when he launched the party’s election manifesto yesterday. Ending the Brexit paralysis that has “held back” the UK since the 2016 EU referendum was top of his agenda. Mr Johnson said: “Get Brexit done and we can restore confidence and certainty and business and families,” adding “Get Brexit done and we can focus our hearts and minds on the priorities of the British people.”
The prime minister is promising to deliver Brexit by the end of January, by presenting the Withdrawal Agreement Bill to Parliament before 25 December. If MPs ratify the prime minister’s deal before the UK is due to leave the EU on 31 January, the pound to US dollar rate could prosper. There would be a “transition period” following this, during which the UK would continue to adhere to EU rules while the two sides negotiated a permanent trade deal.
Opinion polls currently predict a comfortable victory for the Conservative Party that could allow Mr Johnson to pass his Brexit deal through Parliament. However, any signs that Labour are narrowing the Tories lead in the polls could weigh on the pound, as fresh political uncertainty takes hold.
The UK economic calendar is relatively quiet this week, with a few mid-tier announcements on the horizon, such as consumer confidence and house price data.
US-China trade negotiations will remain under the microscope. Any indication that a deal is being delayed further could boost demand for the safe-haven dollar. Alternatively, a deal would represent a boost for the US economy, making a Fed rate cut unlikely – also dollar positive.
A slew of significant US data across the week could also influence the dollar if it springs any surprises or influences Fed rate speculation. US wholesale inventories data is published on Tuesday, followed by key Personal Consumption Expenditure inflation data and growth rate data on Wednesday and manufacturing figures on Friday. If any data disappoints, the likelihood of Fed interest rate cuts could rise and the pound sterling to USD rate could advance more easily.
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