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GBP/USD Struggles to Hold onto Best Levels as US Production Beats Forecasts

Last week’s high: $1.2996

Last week’s low: $1.2700

 

Pound’s Brexit Rally Slows but GBP/USD Still Sees Solid Gains

For most of the past week, the Pound to US Dollar exchange rate trended with an upside bias. GBP/USD climbed towards the end of the week as hopes for a softer Brexit rose while the US Dollar weakened slightly on risk-sentiment.

As the UK MPs blocked the government’s Brexit deal, Parliament is now perceived as having more input in how Brexit will unfold. This bolstered hopes that a no-deal scenario can be avoided, making the Pound more appealing.

In the end though, the Pound to US Dollar exchange rate was unable to hold its best levels as Brexit uncertainties still dominated the UK outlook, while the US Dollar was supported by some stronger US ecostats.

On Friday, UK retail sales results came in surprisingly weak, while the latest US industrial and manufacturing production stats came in well above forecasts.

As the week’s Pound Brexit rally cooled, these ecostats kept GBP/USD from ending the week near its best levels.

 

USD Outlook: Investors Anticipate Brexit Developments and US-China Trade News

After the US Dollar saw weaker trade in the first half of the month, the currency rebounded last week. However, as US data is unlikely to be as influential next week, the US Dollar’s potential for further strength is limited.

This means that if there are any optimistic Brexit developments, the Pound to US Dollar exchange rate could climb even higher in the coming sessions.

As for the US Dollar, while PMI projections could be fairly influential, the currency is more likely to strengthen if US-China trade jitters worsen and leave investors more eager to buy safe haven currencies.

If there are any optimistic developments regarding the still ongoing US government shutdown, this could also give the US Dollar some reprieve.

 

Key Events

22nd January

09:30 UK Job Market Report

15:00 US Existing Home Sales

23rd January

11:00 UK CBI Business Optimism

11:00 UK CBI Industrial Trends Orders

24th January

14:45 US Markit PMI Projections

25th January

11:00 UK CBI Distributive Trades

 

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

Alastair Archbold

Foreign Exchange Manager

aja@fcgworld.co.uk

 

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