Sterling managed to climb back towards $1.61 today as the U.S. government shutdown shows no signs of ending. Trading opened with the GBP/USD cross sitting just above $1.6030 but as they day went on exchange rates climbed to reach a high of $1.6096. With no data coming out of the UK, U.S. or Eurozone today the on-going stalemate in the States continued to dominate the news. For more information on live rates of exchange call me directly on 0044 (0) 1442 892 065.
It has been a tricky few days for the pound, with all the problems facing the U.S. at the moment you might of thought the pound would continue to gain strength against the troubled U.S. dollar. However, with the UK construction and service sectors, along with the Halifax Price index failing to impress last week the GBP/USD cross was unable hold above $1.62. Although last weeks numbers weren't a total shambles it does show the UK economy is not out of the woods just yet and should act as reminder not to get too far ahead of ourselves.
Until the shutdown in the U.S. comes to an end questions will continue to be raised about the impact it will have on the U.S. economy. From the news coming out of Washington at the moment it doesn't look like things will be resolved anytime soon and there a growing concerns the shutdown is starting to affect business.
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It is likely the number of people being forced to take unpaid leave will increase over the next few days as more companies face being closed down due to political stubbornness. The more companies that close the bigger the impact on U.S economy, which in turn will de-value the dollar and reduce the chance we will see the U.S Federal Reserve starting to wind down their current QE programme before the end of year.
Everyday that passes also brings us closer to a U.S. default. Government officials have until the 17th October to raise the debt ceiling or face the prospect of not being able to pay their bills. I think it is unlikely that will happen but if it does GBP/USD would quickly rise.
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