Pound to Dollar Forecast: GBP to USD Rate Falls as Labour Gain Ground on Conservatives

GBP to USD Rate Strengthens on the Back of Trump Trade Comments

Polls Suggest Labour Are Narrowing the Conservatives Lead

Is the election pendulum beginning to swing in the Labour party’s favour? This week’s opinion polls certainly suggest so: a poll compiled by Kantar that was released yesterday indicated that the Conservative party’s lead has shrunk from 18 to 11 points; while a poll from ICM late on Monday, suggested that the gap had fallen from 10 to 7 points across last week.

The pound to the dollar rate – which has been buoyed by hopes that Boris Johnson can win a majority, paving the way for his Brexit deal to be passed – dropped back below the 1.29 level, as expectations of another hung parliament increased. Just a day earlier the pair had headed in the other direction, partly due to contrasting polling data over the weekend that made better reading for the Conservatives. This demonstrates just how sensitive the pound is to election matters.

US-China Trade Saga Rumbles On

Hopes of breaking the deadlock in the US-China trade war received a boost on Monday when Beijing announced that it will raise penalties on violations of intellectual property (IP) rights – one of the main sticking points in trade talks. China also said that it will consider lowering the thresholds for criminal punishments for IP theft. The US wants China to crack down on IP theft and to stop forcing US companies to provide their commercial secrets as a condition for operating there.

On Monday, China’s Global Times reported that the two countries were very close to a phase-one deal. However, some analysts suggested that they merely agreed on a framework to work by. Signals that a deal is close is generally considered positive for the dollar, although news to the contrary may be offset by the currency’s safe-haven status.

US Federal Reserve Governor Lael Brainard was mostly upbeat about the near-term outlook for the domestic economy, “despite persistent uncertainty about trade conflict”, in a speech to the New York Association for Business Economics yesterday.

The US Federal Reserve digested mixed economic figures yesterday: the Housing Price Index came in higher than analysts’ estimated for September, US new home sales fell in October and US consumer confidence fell for a fourth consecutive month.

Regarding the influence of data on interest rates, Brainard said: “I will be watching the data carefully for signs of a material change to the outlook that could prompt me to reassess the appropriate path of policy”.

Looking Ahead

To say it’s a busy day in the US economic data calendar would be an understatement. In contrast, influential data is lacking for the pound. Instead, it will continue to be influenced by the latest political headlines and polling figures.

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.