GBP/USD Outlook: Sterling Haunted by Brexit Uncertainties

Last week’s high: $1.2263

Last week’s low: $1.2070

US Dollar Eases as Dovish Fed Expectations Weigh on ‘Greenback’

The Pound (GBP) opened the week down against the US Dollar (USD) despite mounting cross-party opposition for a no-deal Brexit.

Shadow Chancellor John McDonnell said on Monday:

‘There is a need now to bring MPs back together again because we need time now to really have a proper debate and discussion about this matter.’

Tuesday saw the GBP/USD sink further after Donald Tusk, President of the European Commission, rejected Prime Minister Boris Johnson’s call to scrap the Irish backstop.

Towards the top of the week USD investors focused on the Jackson Hole Symposium and Fed Chair Jerome Powell’s keynote speech which they hoped might offer further insights into the Federal Reserve’s near-term policies.

Thursday saw the GBP/USD exchange rate temporarily surge on rising hopes for an EU compromise over Brexit following Boris Johnson’s unexpectedly positive meeting with French President Emmanuel Macron.

At first Mr Macron appeared to support concessions for securing a deal but then reneged on his own sentiment, describing the Irish backstop as an ‘indispensable’ part of any successful withdrawal agreement.

In the end, Sterling closed the week ahead of the US Dollar after a largely substanceless address from Mr Powell at the Jackson Hole Symposium failed to allay fears for future rate cuts from the Federal Reserve.

USD Outlook: Brexit Developments Could Continue to Weigh on Sterling Next Week

US-China trade developments will remain in focus for US Dollar traders in the week ahead, with any sign of escalating tensions likely to weigh on market sentiment in the ‘Greenback’.

Monday’s publication of the US goods order figure for July are expected to show an easing from 1.9% to 1%, potentially weakening the USD/GBP exchange rate.

US Growth figures for the second quarter are also expected to ease on Thursday.

Meanwhile, Sterling investors will be watching for any further Brexit developments and with the Irish backstop a contentious issue in the House of Commons, we could see no-deal fears continue to drag on the GBP/USD exchange rate.

Key Events

26th August

13:30 US Durable Goods Orders (Jul)

27th August

09:30 US Consumer Confidence Index (Aug)

29th August

13:30 US Gross Domestic Product (Q2)

13:30 US Advance Goods Trade Balance (Jul)

30th August

00:01 UK GfK Consumer Confidence (Aug)

13:30 US Core Personal Consumption Expenditure (Jul)

14:45 Chicago Purchasing Managers’ Index (Aug)