Last week’s high: $1.3289
Last week’s low: $1.2965
Pound Recovers from Lows Versus US Dollar on Trump’s Concerning Comments
Foreign exchange markets were shocked by the latest developments in the US-China trade dispute on Friday, leading to a US Dollar (USD) selloff and helping the highly unappealing Pound (GBP) to recover slightly from its worst levels.
For most of the week, investors had been selling the Pound due to concerns about UK Prime Minister Theresa May’s ability to push her Brexit plans through Parliament. May has seen divisions within her own party over Brexit, worsening fears that a worst-case scenario ‘no deal’ Brexit was likely.
Sterling only became less appealing when Britain’s June inflation and retail sales results were published. All major prints came in well below forecasts and weighed on Bank of England (BoE) interest rate hike bets.
However, the US Dollar was unable to capitalise on Sterling weakness, as at the end of the week the US currency was sold in reaction to some surprising comments from US President Donald Trump.
Trump seemed to criticise the strength of the US Dollar compared to the weakness of the Euro (EUR) and Chinese Yuan (CNY). On top of this, he criticised the Federal Reserve for hiking US interest rates. Overall, the comments made investors anxious about the possibility of a currency war, as well as making observers anxious about the Federal Reserve’s independence.
USD Outlook: US Growth Results in Focus amid Lack of UK Data
The UK economic calendar will be a little quieter next week, with the only prints of note due for publication being the Confederation of British Industry’s (CBI) latest business reports. As a result, Brexit developments and key US datasets will be the most influential factors in GBP/USD movement.
A slew of US data will be published throughout the week, including home sales data on Monday and Wednesday and Markit’s July PMI projections on Tuesday. This will give investors a better idea of how the US economy is currently performing amid trade protectionism concerns.
However, the most influential US data next week will be published on Friday in the form of the latest US Gross Domestic Product (GDP) numbers. US growth figures for Q2 are expected to show a notable improvement over Q1, so if the data misses forecasts GBP/USD is more likely to advance.
Investors are likely to remain anxious about Trump’s recent comments about the US Dollar and Federal Reserve too. Any sign of escalation to a potential currency war could lead to further USD weakness.
13:30 US Chicago Fed National Activity Index
15:00 US Existing Home Sales
11:00 UK CBI Industrial Trends Orders
14:45 US Markit PMI Projections
11:00 UK CBI Business Optimism
15:00 US New Home Sales
13:30 US Durable Goods Orders
13:30 US Wholesale Inventories
13:30 US Growth Rate
13:30 US PCE Prices
15:00 US Michigan University Consumer Sentiment
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Senior Currency Broker
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