Pound Fails to Hold its Ground against Safe Haven US Dollar
Last week’s high: $1.2859
Last week’s low: $1.2729
GBP/USD Tumbles amid Brexit Fears and some Persisting Safe Haven Demand
Despite risk sentiment surging last week on hopes of a breakthrough in US-China trade tensions, the Pound to US Dollar exchange rate ultimately fell as Brexit uncertainties kept the Pound even more unappealing and volatile than the US Dollar.
Towards the end of the week, UK Prime Minister Theresa May indicated that if her Brexit plan fails to pass in a parliamentary vote on 11 December the government would likely ramp up its preparations for a no-deal Brexit. This, as well as fresh Brexit warnings from the Bank of England (BoE), led to investors selling the Pound.
Sterling’s weakness was broad and as a result, the British currency was unable to capitalise on market risk-sentiment.
The US Dollar spent most of the week falling as investors sold safe haven currencies amid speculation that the US and China could de-escalate long-lasting trade tensions during an anticipated G20 summit in Argentina.
However, on Friday, with the G20 summit getting underway, the US Dollar firmed as market uncertainty left safe haven currencies looking appealing.
USD Outlook: US-China Trade Developments and PMI Data to Drive GBP/USD
Investors are likely to spend much of today’s session reacting to the events and outcomes of the G20 summit, especially those regarding US-China trade matters. If tensions are perceived to have lightened, the Pound to US Dollar exchange rate could be in for a recovery as the safe haven US Dollar would weaken.
Influential US manufacturing PMI data from ISM will be published later today, which could further influence the US Dollar if it surprises investors.
Overall, it’ll be quite a busy week in terms of US data with productivity and non-manufacturing PMI stats coming in on Wednesday, trade stats on Thursday and the influential Non-Farm Payroll report on Friday.
While UK PMI results for November will be published through until Wednesday, they are unlikely to be particularly influential. Pound investors will be primarily focused on the perceived support of Theresa May’s Brexit plan next week, ahead of the parliamentary vote on 11 December.
Key Events
3rd December
09:30 UK Manufacturing PMI
15:00 US Manufacturing PMI
15:00 US Construction Spending
4th December
09:30 UK Construction PMI
15:00 US IBD/TIPP Economic Optimism
5th December
09:30 UK Services PMI
13:15 US ADP Employment Change
13:30 US Non-Farm Productivity
15:00 US Non-Manufacturing PMI
6th December
13:30 US Trade Balance
15:00 US Factory Orders
7th December
09:30 UK Consumer Inflation Expectations
13:30 US Non-Farm Payrolls
13:30 US Unemployment Rate
15:00 US Michigan Consumer Sentiment
15:00 US Wholesale Inventories
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Arron Morris
Currency Trader
T: 01442 892 065