With less than one day until the Bank of England’s (BoE) interest rate cut decision is announced, GBP has lost ground against the USD as investor’s nerves kick in. This has caused GBP to tumble as the chance of a cut sits at a 50-50 chance. Furthermore, GBP lost support after flat retail sales data which has lowered consumer confidence. Finally, recent Brexit warnings from a key German industry association have knocked the pound further as they suggest that the timeframe given for the UK and EU to negotiate a trade deal is “impossible”. Meanwhile the USD continues to benefit from the market’s coronavirus fears as investors flock to the safe-haven currency.
Long Stretch of Bad Luck for the GBP as It Awaits the BoE Rate Decision on Thursday
GBP has not had the best trading conditions over the past week or so. Conditions appeared positive after the release of recent economic data releases, with investors hoping that GBP may be on the rebound. However, after a series of calamities, GBP has now been named the worst performer of the past 24 hours. First of all, the currency is suffering from investor jitters about the decision that will be announced from the Bank of England in their interest rate decision meeting tomorrow. This has caused movement as investors flock to safe-haven currencies until the news breaks out.
Meanwhile, recent comments from key German industry association, BDI, noted that the time given for the UK and EU to negotiate a trade agreement is “impossible”. These comments reawakened thoughts of a ‘hard’ Brexit once more and sent the GBP tumbling further.
To add to its misery, the UK’s retail sales index remained flat for a second consecutive month in January as the retail sector failed to benefit from the result of the snap general election as a sense of Brexit-based anxiety lingered. The combination of the three have seen that GBP now sits at the bottom of the trading ‘pecking order’ and is likely to remain volatile until the BoE announce their decision tomorrow.
USD Benefits From Coronavirus Fears and Edges Over GBP
Thanks to the recent fears surrounding the Chinese coronavirus, the USD has hit the mid-week with a strong performance. This comes after rising fears herd investors towards safe-haven currencies like USD as risk-sentiment is lowered across the global trading scale. The US is expecting its December US durable goods orders data later today, any poor performances could limit the recent gains it has made. The currency continues to cash in on the GBP’s weakness ahead of their BoE meeting on Thursday. The GBP has seen a downward spiral which has favoured the downside in the GBP/USD exchange rates.
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