British Pound Extends Gain as U.S Shutdown Fuels Dollar Selloff
The British pound maintained its gaining streak, strengthening against the US dollar for three straight days due to US political deadlock. The sterling edged higher by 0.20% as investors sold off the US dollar amid fears of a US government shutdown.
FX data revealed that the GBP/USD pair is trading at 1.3461 while markets anticipate tax hike after UK Chancellor speech. The market also anticipated dollar to remain downbeat against trading partners for the week.
The lack of progress between the White House and Democratic leaders on funding the US government keeps traders anxious due to concerns that a shutdown might disrupt the release of economic data, like the Nonfarm Payrolls figures, set to be announced on Friday.
Job openings in the US remained steady in August, as vacancies ticked up from 7.208 million in July to 7.227 million, exceeding estimates of 7.2 million.
At the same time, the Conference Board (CB) revealed that Consumer Confidence missed estimates of 96.0, dipping from 97.8 in August to 94.2 in September.
Meanwhile, UK Gross Domestic Product (GDP) for the second quarter expanded by 1.4% year on year above the consensus and the previous print of 1.2%. The data failed to prop Sterling, which mainly benefited from overall US Dollar weakness.
Despite this, GBP/USD is poised to end the month with losses of 0.40%, but central bank divergence suggests that the pair could resume its uptrend in the near term.
Pound started uptrend as UK Chancellor Rachel Reeves said the government is facing difficult choices, promised she would not take risks with the public finances.
In her speech at Labour’s annual party conference in Liverpool, the chancellor pledged to keep “taxes, inflation and interest rates as low as possible”.
But hinting at further tax rises in November’s budget, she said the government’s choices had been made “harder” by international events and the “long-term damage” done to the economy.
Reeves is facing a difficult budget, with economists warning tax rises or spending cuts will be needed for the chancellor to meet her self-imposed borrowing rules.
Pressed over whether she would have to put up taxes in a BBC interview ahead of her speech, Reeves said “the world has changed” in the last year – pointing to wars in Europe and the Middle East, US tariffs and the global cost of borrowing.
“We’re not immune to any of those things,” she added. If taxes do go up in the budget, this prepares the ground for the government’s argument for why this is necessary.
Reeves criticised previous Conservative governments, accusing Liz Truss of sending mortgage costs “spiralling” with her mini-budget. #British Pound Extends Gain as U.S Shutdown Fuels Dollar Selloff
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