The Pound US Dollar (GBP/USD) exchange rate wavered close to a four-month high on Tuesday, with the ‘Greenback’ remaining weak but a lack of data limiting the pairing’s movement.
Pound to Dollar (GBP/USD): 1.36795 (+0.11%)
Euro to Dollar (EUR/USD): 1.18767 (+0.14%)
Dollar to Japanese Yen (USD/JPY): 154.136 (-0.66%)
DAILY RECAP:
The US Dollar (USD) remained firmly on the back foot on Tuesday, after a snowballing selloff saw USD slide to multi-month lows the previous day.
Investors are increasingly bearish on the American Dollar amid concerns about US foreign policy and domestic tensions. Although President Donald Trump climbed down from threats of fresh tariffs on European countries, he then issued a new warning to Canada of 100% tariffs if the country strikes a trade deal with China.
Meanwhile, outrage over the fatal shootings of two American citizens by immigration agents in Minneapolis have introduced the risk of another government shutdown, as some Democrats have withdrawn support for funding for the Department of Homeland Security.
Tensions both at home and abroad have made many investors wary of the US Dollar, amid signs of growing political instability.
USD managed to initially avoid further losses on Tuesday as Trump took measures to de-escalate the situation in Minneapolis. However, the currency failed to make a recovery.
Meanwhile, the Pound (GBP) struggled to press the advantage against the US Dollar on Tuesday amid an ongoing lack of impactful UK economic data.
Domestic British headlines did little to help GBP. Signs of fresh infighting amid the governing Labour Party seemed to subdue Sterling, after Prime Minister Keir Starmer’s allies blocked Andy Burnham – the Labour Mayor of Manchester and a popular party figure – from running in an upcoming byelection.
Some commentators believe the move was to prevent Burnham from challenging Starmer’s leadership.
Near-Term GBP/USD Forecast: Trump to Announce Fed Nominee?
Looking forward, President Donald Trump is set to announce his nominee for Federal Reserve Chair by the end of the month, with many commentators believing he could unveil his pick during the Fed’s policy announcement on Wednesday evening.
As Trump has piled enormous pressure on current Chair Jerome Powell to lower interest rates, he is expected to nominate a dovish candidate to replace Powell when his term ends in May. If so, the US Dollar could come under considerable pressure.
Meanwhile, UK economic data remains in short supply on Wednesday, likely leaving Sterling to trade on wider market trends. Risk appetite could impact the increasingly risk-sensitive Pound, particularly against the safe-haven US Dollar. Could an improving mood boost GBP/USD?
