Pound to Dollar Forecast: Election Checks GBP to USD Gains

GBPUSD Forecast: US Federal Reserve Keep Interest Rates on Hold as GDP Falls 4.8 Percent

General Election Weighs on British Consumer Confidence

The pound – already buoyed by the much-anticipated YouGov MRP poll on Wednesday – made fresh gains yesterday, after it was revealed house prices rose 0.8% in the year to late November – a slight upswing from October. The GBP vs USD rate was unable to sustain this momentum for long, however, as the lingering risk of a hung parliament checked its stride. History tells us that polls can’t always be trusted, and investors in the pound are acutely aware of this.

The British consumer confidence index remained stuck at -14 in November; its joint-lowest level since 2013. The pound to the dollar rate didn’t take kindly to news that uncertainty around the general election and Brexit is weighing on households.

Trump Signs Hong Kong Pro-Democracy Bills

Donald Trump has signed two bills that support Hong Kong’s pro-democracy protesters, despite requests from China to block the legislation. This angered Beijing, at a time when the US is attempting to negotiate with China over the completion of a “phase one” trade deal. While this initially encouraged demand for the safe-haven dollar, the president’s actions soured the chances of a deal, preventing the dollar from gaining significant traction.

Looking Ahead

Neither Jeremy Corbyn nor Boris Johnson will take part in the seven-way election debate that’s due to be broadcast on the BBC tonight. This might soften its impact on the value of the pound sterling to USD rate.

A lack of fresh US data ahead of the weekend means Monday’s ISM manufacturing PMI has already come into focus. An uptick from 48.3 to 49.4 – as forecast – would suggest the US manufacturing sector is gathering some much-needed pace, having lost momentum recently – this would offer the dollar a boost. However, a further deterioration in manufacturing growth could encourage the GBP to USD rate to edge higher at the start of the week.

Analysts at Union Bancaire Privée (UBP) – a Swiss private bank – are forecasting the dollar to trend lower over the course of next year. They predict the rate at which the US economy is slowing will be the catalyst for this, prompting the Fed to cut interest rates further. UBP forecast the pound vs USD dollar rate to trade towards 1.35, possibly reaching highs of around 1.40.

If you would like to learn more about factors influencing GBP/USD exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.