Pound US Dollar Exchange Rate Set to Slip amid Turbulent UK Political Climate
The Pound US Dollar (GBP/USD) exchange rate is wavering today as expectations of a stable UK political climate are still some way off despite Boris Johnson’s resignation.
At time of writing the GBP/USD exchange rate is around $1.198, down roughly 0.3% from this morning’s opening levels.
Pound (GBP) Softens after Resumption of Political Disarray
The Pound (GBP) initially spiked after Boris Johnson announced his resignation yesterday, thought to finally bring an end to months of uncertainty.
Unfortunately, the circus is set to continue as now the question remains of who is taking over and when Johnson will actually relinquish his role.
Despite conceding defeat and stepping down, Johnson remains adamant on staying on until a new leader is elected, much to the dismay of his opposition and his own party. Sir John Major, former Conservative Prime Minister, has joined the chorus of those wanting him gone sooner:
‘The proposal for the prime minister to remain in office – for up to three months – having lost the support of his cabinet, his government and his parliamentary party is unwise, and may be unsustainable.’
Until the Conservative party elect a new leader, the political uncertainty is likely to continue weighing on the Pound.
US Dollar (USD) Set to Strengthen amid Positive Jobs Data
The US Dollar (USD) is regaining strength today after yesterday’s shifting market conditions as investors grow in confidence ahead of expected positive jobs data due out today.
Unemployment is expected to have remain at its lowest rate since February 2020 unchanged for a fourth consecutive month, bolstering expectations of a further 75bps rate hike.
Elsewhere, the minutes from the Federal Open Market Committee reinforced expectations for further aggressive rate hikes. Fed policymakers all agreed that interest rates may need to continue rising for longer, preventing higher inflation from becoming entrenched. A general consensus that an increase of 50 or 75 basis point would be appropriate at the July policy meeting.
Looking beyond July, the Fed is likely to continue its aggressive hiking path. Two further hikes of 50bps are expected in September and November, lending further support to the US Dollar. The Fed’s persistent hawkish stance and resilient US economy keep investors’ confidence high.
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