Pound v US dollar: Falling UK business confidence triggers GBP slump against USD

ON A slow news day for the UK and the US, the pound has fallen to a rate of $1.302 against the US dollar, up from $1.281 at the same time last week but below the pairing’s recent highs.

Pound exchangeGETTY

The pound has fallen to a rate of $1.302 against the US dollar, up from $1.281

This GBP/USD decline comes as UK businesses report fresh lows in confidence as a result of the general election and persistent fears about the future.

Association of Chartered Certified Accountants (ACCA) Senior Business Analyst Narayanan Vaidyanathan has analysed the problems. 

Mr Vaidyanathan said: “This is the most challenging economic situation the UK has seen in several years. 

"Recent political developments, from Brexit to an unexpected general election outcome, have contributed to a sharp fall in the pound which has increased import costs and inflation and decreased household purchasing power.

"Consumers have been cutting savings and borrowing more, which is not sustainable in the longer term.”

Pound traders have additionally been rattled by news that UK businesses are still not fully prepared for a post-Brexit environment.

Pound GETTY

This GBP/USD decline comes as UK businesses report fresh lows in confidence

The pound’s decline comes despite recent instability in the US, where efforts to repeal and replace ‘Obamacare’ have stalled. 

The US dollar has risen to £0.768 against the pound, which only comes after an earlier dip to £0.762 on 18th July.

The failure for Republican officials to agree on replacing the healthcare law has potentially dire implications for the rest of the Trump presidency.

Seen as a lynchpin policy, if efforts to replace or even simply repeal Obamacare fall short then the future of Republican reform plans could be called into question.

The next UK data that could influence the GBP/USD exchange rate will come on Thursday – UK retail sales data for June.

Consumer spending is expected to rise on both the month and the year. If these forecasts prove accurate, the pound could advance against the US dollar.

Expert guide to how exchange rates work

If sales rose, this could reassure traders who have been worried about the impact of the wage squeeze on consumer spending.

US dollar-influencing news today will include housing and commodities data. In the former case, building permit and house construction figures for June will be released. 

Permits and housing starts are projected to rise, which could bolster the USD/GBP exchange rate.

The other US news is a gauge of crude oil stock. If US stocks decrease as expected then the US dollar could appreciate further, as this may raise global crude oil prices.

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