GBP/USD Driven by US-China Trade Developments and UK Political Uncertainty

Last week’s high: $1.2497

Last week’s low: $1.2275

Pound Weakened by Brexit News, US Dollar Driven by Risk-Appetite

The GBP/USD exchange rate shed almost two cents over the course of last week as the resumption of parliament created political chaos, weakening the Pound, while a risk-off environment bolstered the US Dollar.

At the start of the week PM Boris Johnson’s proroguing of parliament was deemed unlawful by the Supreme Court.

The decision led to parliament reconvening and opposition MPs calling for Boris Johnson’s resignation.

Johnson, meanwhile, was vocal in his opinion about the UK leaving the EU on 31st October and pushed for a general election.

However, the US Dollar’s gains were capped by an improvement in risk appetite.

Hopes that the US and China are taking positive steps towards a long-awaited trade agreement bolstered demand for higher-risk currencies like the Australian and New Zealand Dollars and weakened safe-havens like the US Dollar.

The US did publish upbeat data on Friday however, with durable goods orders coming in at 0.5% rather than 0.2% and the University of Michigan Consumer Confidence index rising from 92.0 to 93.2.

USD Outlook: Will US Data Lower the Odds of Further Rate Cuts?

US-China trade news will continue having an impact on USD exchange rate movement next week, but there are also some significant US data releases to focus on.

The most influential (the ISM Non-Manufacturing/Services Composite and Non-Farm Payrolls) are due out towards the end of the week.

If the reports impress, weakening the argument for further Federal Reserve rate cuts this year, the US Dollar could strengthen.

Meanwhile, the Pound is likely to remain under pressure next week as the UK’s Brexit deadline draws ever closer.

Another week of political wrangling and limited progress in Brexit talks would be GBP-negative.

Key Events

30th September

14:45 USD Chicago Purchasing Managers Index

1st October

15:00 USD ISM Employment (SEP)

15:00 USD Construction Spending

2nd October

12:00 USD ADP Employment Change

3rd Oct

USD ISM Non-Manufacturing/Services Composite (SEP)

USD Durable Goods Orders (Final)

4th Oct

13:30 USD Change in Non-farm Payrolls (SEP)