GBP/USD: Dollar Steady vs. Pound Ahead of G20 Summit

The pound dropped through US$1.28 on Thursday after a dovish Bank of England. The pound US dollar exchange rate dropped to a low of US$1.2795 before clawing some of those losses back. The pair closed 0.2% lower at US$1.2820 in its second consecutive losing session. Today the pound is slipping once again versus the dollar.

The pound tanked on Super Thursday the day when the BoE gave its monetary policy announcement, released the minutes to the monetary policy meeting and the quarterly inflation report. As expected, the BoE kept monetary policy unchanged with interest rates at 0.75%. The minutes of the meeting showed that two policy makers, Michael Saunders and Jonathan Haskel unexpectedly voted to cut interest rates immediately by 25 basis points. With two policy makers in favour of a rate cut, the central bank is moving closer to easing monetary policy. This weighed on demand for the pound.

In the quarterly inflation report the BoE cut growth forecasts for the UK. The central bank cited slowing global growth and trade barriers that would take effect immediately on the implantation of Boris Johnson’s Brexit deal.

Today investors will switch their attention back to the UK elections. Boris Johnson remains comfortably in the lead, which should offer some support to the pound.

Trade Headlines Drive Dollar Higher

The US dollar pushed higher versus its peers again on Thursday on trade deal optimism. As a trade tensions have thawed and a trade deal is looking increasingly more likely, the dollar has benefited.

Reports in the previous session that China and the US had agreed to gradually roll back the trade tariffs at each new phase of a trade deal boosted the greenback. This is because the US manufacturing sector has been negatively impacted by the ongoing trade dispute. Should a deal be achieved then the manufacturing sector stands more chance of recovering, strengthening the US economy again. Under this scenario the Federal Reserve wouldn’t need to cut ease monetary policy further, boosting the dollar

A report on Reuters also said that President Trump and President Xi could sign a trade deal when at the NATO meeting in London on 3 -4 December.

Today trade headlines will remain in focus. US consumer sentiment data could also attract investors attention. Analysts are expecting sentiment to hold steady in November at 95.5. A stronger reading could boost the dollar higher.

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 GBP = 1.28934 USD

Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound.

Or, if you were looking at it the other way around:

1 USD = 0.77786 GBP

In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar.

 


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