The Pound-Dollar rate could remain under pressure if US consumer confidence strengthens and risk aversion keeps demand for the safe-haven Dollar elevated.
The Pound US Dollar (GBP/USD) exchange rate was subdued on Monday as a risk-off mood weighed on the pairing.
At the time of writing, GBP/USD was trading at $1.3642, having recouped earlier losses but still subdued on the day.
DAILY RECAP:
The US Dollar (USD) enjoyed modest support on Monday as a risk-averse market mood increased demand for the safe-haven ‘Greenback’.
Sentiment soured amid intensifying trade tensions between the US and Canada, after negotiations collapsed on Friday. With trade talks breaking down, Washington imposed a 50% tariff on $20bn worth of Canadian goods, with Ottawa then retaliating.
In addition, the conflict in the Middle East continued to weigh on risk appetite. The US is set to unveil new economic sanctions on Iran, while Tehran has threatened to strike back.
Meanwhile, the increasingly risk-sensitive Pound (GBP) faced modest pressure amid the risk-off mood.
However, Sterling was spared steeper losses thanks to an analysis from the Resolution Foundation.
The thinktank said that UK productivity – a key measure of economic health – is growing faster than official figures suggest.
According to the Resolution Foundation’s analysis, productivity has improved in recent years, rather than worsening. This gave the Pound some cushioning, helping to limit its losses against the US Dollar.
Near-Term GBP/USD Forecast: US Consumer Confidence to Lift the ‘Greenback’?
Looking forward, the focus for USD investors on Tuesday is likely to be the latest US consumer confidence index. If household morale improved in August, as forecast, the ‘Greenback’ could catch bids.
Meanwhile, risk sentiment could continue driving USD. If the US-Canada trade war and American sanctions on Iran raise concerns about the global economy, the safe-haven US Dollar could attract support.
Turning to the Pound, British economic data remains in short supply on Tuesday, likely leaving Sterling to trade without a strong directional bias. A risk-off mood could put modest pressure on the increasingly risk-sensitive UK currency.
Our currency coverage draws on live market data, official economic releases and published bank research.
