Election Developments Influence Sentiment Towards the Pound
Stagnant would be the best way to describe the GBP vs USD rate at the end of last week, as disappointing UK data and US-China trade jitters cancelled each other out. Before this, however, the pair had performed relatively well, after general election hopes boosted the pound – and not just because the Tories continued to top opinion polls. Not only were their chances of regaining power aided by Nigel Farage’s decision to pull all Brexit Party candidates from Tory-held seats; expectations that they can achieve a majority this time round increased as well. This would represent a favourable outcome for the pound, which would benefit from Boris Johnson breaking the Brexit deadlock.
Despite the Tories topping recent opinion polls, there were signs that the Labour Party was beginning to chip away at the Tories lead, before Mr Farage’s announcement shifted the political landscape. The pound could come under pressure if Labour gathers some momentum in the polls this week. Their performance could be heavily influenced by Jeremy Corbyn’s appearance in the first televised leadership debate due on Tuesday, when he goes head-to-head with Prime Minister Boris Johnson.
The week starts with a raft of relatively insignificant US data as far as exchange rates are concerned. We have to until Tuesday for the first figures of any note, when US Building Permits and Housing Starts are released. Things pick up on Thursday as Initial Jobless Claims, Existing Home Sales and the Philadelphia Fed Manufacturing Survey hit the headlines. We round off the week with the Markit Manufacturing PMI, Markit Services PMI and Michigan Consumer Sentiment Index on Friday.
A busy week in the US economic data calendar is punctuated by the minutes from the latest Federal Open Market Committee meeting on Wednesday. The dollar will be at the mercy of the US Federal Reserve’s latest interest rate announcement. Will they cut them for the fourth time this year or push the pause button – a course of action they hinted at last month?
A quiet week on the UK economic data release front adds to the significance of Thursday’s Public Sector Net Borrowing figures. But it’s Tuesday’s Inflation Report Hearings – when the Governor of the Bank of England and several Monetary Policy Committee members testify on the inflation and economic outlooks before Parliament’s Treasury Committee – that’s likely to grab the headlines and influence the pound vs US dollar rate the most next week.
To discuss how these factors are likely to continue impacting cable exchange rates, get in touch with a member of our team on +44 (0)1494 360 899 or use the form below.