The US Dollar Pound exchange dropped again last week, losing almost a penny in value as traders cooled on the ‘Greenback’ Trump rally while buying Sterling on new Brexit hopes. USD GBP is now around two pence below 2016’s three-decade-highs of 0.82 and could return to this high despite the pair’s current uptrend.
US Dollar (USD) Continues to Fall on Profit-Taking
The US Dollar’s bullishness was stopped short last Thursday as US markets closed to observe the Thanksgiving holiday. This light US trade was exactly what traders needed to begin a bout of profit taking on the US Dollar’s recent highs.
As traders sold the ‘Greenback’ from its highs to lock in profit on Thursday, this movement continued on Friday due to an underwhelming set of US trade balance data.
October’s advance goods trade balance results were expected to worsen slightly from -$56.5b to -$58b, but instead slumped to -$62b. This, as well as an underwhelming wholesale inventories figure of -0.4%, kept the ‘Greenback’ weaker on Friday.
On Monday, traders continued to sell USD from its highs. This was a mixture of profit-taking and uncertainty due to calls for an election vote recount in some key swing states, as losing Presidential candidate Hillary Clinton’s popular vote lead extended to 2.4 million.
Underlying factors in the US Dollar remain strong and continue to give it significant support. Bets of a December Federal Reserve rate hike remain at over 90%, for example.
Pound (GBP) Slumps on Profit-Taking from Highs
Traders lost appetite for the Pound on Monday after its sturdy trade last week and profit-taking selloffs increased. This saw the British currency even losing out against a weak US Dollar in morning trade.
Increased strength in its rival, the Euro, also led to a weaker Pound, despite the lack of any influential UK ecostats publishing on Monday.
Sterling was also weighed down considerably on Monday by fresh Brexit concerns, including news that the UK government faced a new legal battle on Britain’s European Union single market membership.
Underlying factors in Sterling have improved overall though, after last week’s news that the UK government may aim to negotiate a Brexit transition period.
US Dollar Pound Long-Term Forecast: Brexit Fears to Drag Pound Lower?
The mid to long-term trajectory for the US Dollar is still upward due to a considerable number of underlying supporting factors.
This includes of course December’s Fed rate hike bets, as well as US President-elect Donald Trump’s plans to boost infrastructure spending in order to increase US economic activity once he takes office in January.
As a result, the US Dollar could easily surge after the Fed’s December meeting and could continue to perform strongly into January and beyond depending on the tone of the Trump administration.
However, if uncertainty surrounding the US election result continues to worsen the ‘Greenback’ could remain susceptible to the Pound’s fluctuations.
Sterling, on the other hand, remains vulnerable to ongoing Brexit concerns and it seems like more complications and factors of uncertainty regarding the process crop up each day.
At the time of writing, the US Dollar Pound exchange rate trended in the region of 0.80, while the Pound US Dollar exchange rate traded at around 1.24.
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