Pound US dollar exchange rate stuck at seven-week low as US GDP beats forecasts

Philip McHugh October 29th 2018 - 2 minute read

The pound stalled against the US dollar at the end of last week, with GBP/USD struck at a seven-week low in the wake of the latest US GDP figures.

Sterling opens this week similarly flat, with GBP/EUR stable at €1.1250, GBP/USD muted at $1.2815, while GBP/CAD and GBP/AUD hold steady at C$1.6784 and AU$1.8049 respectively. Only GBP/NZD shows any notable movement so far today as it trips to NZ$1.9583.

Looking ahead, Chancellor Philip Hammond will publish his Autumn Budget later today, with the pound potentially strengthening if he is able to find some wiggle room to boost public spending.

What’s been happening?                            

The pound remained on the defensive against its two main currency peers on Friday, with the currency struck trading at multi-week lows as Brexit jitters continued to temper demand.

These concerns came as a result of a report from the National Institute of Economic and Social Research (NIESR) which warned that a no-deal Brexit could result in UK coffers being £30bn lighter over the next five years compared to a soft Brexit.

This weakness in Sterling left GBP/EUR open to losses at the end of last week, with the euro continuing to find support from the European Central Bank’s (ECB) policy meeting earlier in the week.

Meanwhile the GBP/USD exchange rate traded sideways on Friday, with the US dollar closing out the week on a solid footing as a preliminary reading of US third quarter GDP came in higher than expected, albeit slower than in the second quarter.

What’s coming up?

Brexit worries may take a back seat at the start of this week’s session, potentially giving the pound some breathing room as GBP investors focus their attention on the UK’s Autumn Budget.

Markets will be hopeful that the recent fall in government borrowing will allow for the Chancellor to boost public spending over the coming year, potentially helping to aid UK growth.

This will also be the final budget while the UK is still part of the EU and so it will be closely watched for how the UK government is preparing for Brexit.

Meanwhile the euro may trade in a narrow range today, with investors reluctant to alter their positions ahead of tomorrow’s GDP figures.

Finally, the latest US personal income figures may bolster the US dollar this afternoon should incomes have risen in line with expectations last month.

Written by
Philip McHugh

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