Parliament’s Summer Recess May Offer Respite to Pound Sterling (GBP) Exchange RatesAs UK parliament
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As UK parliament prepares to break for summer recess the Pound may still see some political jitters, especially in response to any comments on Brexit.
Fears over a potential hard or even no deal Brexit could well prompt GBP exchange rates to slump this week.
Any signs of progress on either side of the Channel, however, may give investors incentive to favour the Pound over its rivals.
Markets could still be discouraged by the possibility of a leadership challenge against Theresa May, something which could plunge the UK into fresh political turmoil.
The latest CBI business optimism index could offer the Pound support on Wednesday, with the index expected to show an improvement on the quarter.
Evidence of greater confidence within the UK business community would go some way towards improving the outlook of the domestic economy, especially in the wake of June’s disappointing retail sales figures.
As anticipation builds for the Bank of England’s (BoE) August policy meeting, though, the upside potential of the GBP/USD exchange rate could prove limited.
The Pound Sterling to US Dollar exchange rate is currently priced around today's opening levels at £/$ 1.31510.
Analysts at Barclays said, "After last week’s increased volatility, GBPUSD remains susceptible to headline risk although Barclays Research thinks that “a lot of negativity is already in the price”. With parliament in recess, Barclays Research sees “scope for a modest retracement”
Ahead of the weekend the Pound Sterling to US Dollar x-rate returned to a stronger footing, driven by the latest comments from Donald Trump.
Currency markets were spooked by criticism leveled against the Federal Reserve and its intention to raise interest rates, as well as a fresh escalation in trade tensions.
A threat to impose tariffs on all Chinese imports also weighed on demand for the US Dollar, with investors concerned by the prospect of a full-blown trade war between the world’s two largest economies.
Positive UK public sector net borrowing data offered some additional support to the GBP/USD exchange rate, meanwhile, in spite of lingering worries over Brexit.
Worries over the prospect of increased political pressure on the Fed may keep the US Dollar on a weaker footing in the days ahead.
If the Trump administration continues to escalate trade tensions and the prospect of a currency war the GBP/USD exchange rate could benefit.
Worries over the negative impact that US tariffs will have on the domestic economy and its growth could limit the appeal of the US Dollar for some time to come.