Pound US Dollar (GBP/USD) Exchange Rate Flat as US Markets Close

January 20, 2020 – Written by John Cameron

Pound Sterling US Dollar (GBP/USD) Exchange Rate Flat as Markets Focus on BoE

The Pound Sterling US Dollar (GBP/USD) exchange rate remained muted as US markets closed for Martin Luther King Day, leaving the pairing trading at around $ 1.2989.

Sterling remained under pressure as the lack of notable economic data caused markets to shift their focus to the Bank of England’s (BoE) next interest rate decision.

Investors largely expect the bank to slash rates next week, with the chance of a cut rising from 10% to 70% in the course of a week.

However, according to data published today some uncertainty that has weighed on the economy lifted following Prime Minister Boris Johnson’s win last month.

IHS Markit showed its Household Finance Index rose to a one-year high, from 43.2 to 44.6 in January.

Sterling (GBP) Under Pressure On Javid’s Brexit Comments

The Pound remained muted on Monday following comments from British Finance Minister Sajid Javid over the weekend during an interview with the Financial Times.

This sparked fears over weaker ties between the European Union and UK following the country’s exit from EU.

Commenting on the market reaction, RBC Capital Markets chief currency strategist, Adam Cole said:

‘It’s about the UK diverging from Europe, and that would necessarily result in limiting access to European markets. Markets are taking that negatively.’

US Dollar (USD) Rises to Strongest Level of 2020

Meanwhile, the US Dollar was able to rise to its strongest level of 2020 today, following last week’s data which confirmed the US economy was holding up.

Data from Friday showed that US homebuilding jumped to a 13-year high in December, while retail sales rose and manufacturing rebounded to an eight-month high.

However, the Dollar saw little movement over the course of Monday as US markets remained closed.

Pound US Dollar Outlook: Will Weak UK Wage Growth Weigh on GBP?

Looking ahead to Tuesday, the Pound (GBP) could slump against the US Dollar (USD) following the release of British employment data.

If data shows unemployment has increased and wage growth comes in below forecast, Sterling is likely to slide.

Meanwhile, GBP could slide further on Wednesday following the release of UK business surveys.

If surveys disappoint, it will increase the chances of a BoE rate cut which is likely to cause the Pound US Dollar (GBP/USD) exchange rate to slump further.

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TAGS: Pound Dollar Forecasts