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Anxiety over No-Deal Brexit Drives GBP/USD Lower

Last week’s high: $1.2769

Last week’s low: $1.2666

Disappointing US Goods Trade Balance Fails to Boost GBP/USD

Although the Federal Reserve still appears on course to cut interest rates at its July policy meeting this failed to shore up the GBP/USD exchange rate last week.

However, the US Dollar remained generally under pressure thanks to a surprise widening of May’s advance goods trade deficit.

With indications that ongoing trade tensions are weighing on US growth, the mood of USD exchange rates remained bearish.

Hopes of a potential breakthrough in US-China trade relations at the G20 summit did nothing to improve the appeal of the US Dollar, meanwhile.

An increasing sense of anxiety over the possibility of a no-deal Brexit kept the GBP/USD exchange rate on a downtrend throughout the week.

With Conservative leadership candidate Boris Johnson refusing to rule out proroguing Parliament in order to force through a no-deal Brexit investors saw little reason to favour the Pound.

USD Outlook: Signs of Weakening Growth to Weigh on US Dollar

As forecasts point towards an easing in June’s ISM manufacturing and non-manufacturing composite indexes the US Dollar may struggle to find support this week.

Fresh evidence that the US economy is losing momentum would leave USD exchange rates vulnerable to further selling pressure.

However, Friday’s non-farm payrolls report could offer the US Dollar a rallying point if the labour market shows renewed signs of tightening.

On the other hand, the GBP/USD exchange rate is likely to see volatility in response to June’s set of UK PMIs.

While the manufacturing sector is forecast to return to a state of expansion in June any softening of the services PMI could weigh heavily on the Pound.

As the service sector remains the primary engine of growth for the UK economy, investors won’t be happy if the index moves closer to contraction territory.

Key Events

1st July

09:30   UK Manufacturing PMI

15:00   US ISM Manufacturing Index

2nd July

09:30   UK Construction PMI

3rd July

09:30   UK Services PMI

15:00   US ISM Non-Manufacturing Composite Index

5th July

13:30   US Change in Non-Farm Payrolls

 

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To keep up to date with the US Dollar, visit the USD blog in our Currency News section.

 

Arron Morris

Currency Broker

adm@fcgworld.co.uk

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