Pound to US Dollar Exchange Rate Investors Anticipate Further Brexit News
Last week, the Pound Sterling to US Dollar (GBP/USD) exchange rate saw strong gains due to the most optimistic comments about the state of Brexit negotiations in weeks. GBP/USD movement is likely to remain focused on Brexit news.
After opening last week at the level of 1.2843, GBP/USD surged and briefly touched a high of 1.3038 on Thursday. This was the best GBP/USD level since the beginning of August.
While GBP/USD slipped below the level of 1.30 before markets closed for the week, due to stronger market demand for ‘safe haven’ currencies like the US Dollar (USD), GBP/USD could see further gains this week.
UK and EU negotiators are hoping to accelerate the pace of Brexit negotiations, so if negotiators remain optimistic about progress in Brexit talks the Pound to US Dollar exchange rate rally could continue.
Pound (GBP) Exchange Rates Struggle to Hold Best Levels on Brexit Uncertainties
While the Pound (GBP) did climb last week, its rally was short-lived and it remained well below pre-August levels versus the US Dollar.
This was because despite speculation that the EU could offer the UK an unprecedented partnership in terms of non-EU countries, doubts remained that such a deal could be achieved.
After the latest set of UK-EU Brexit negotiations on Friday, UK Brexit Minister Dominic Raab expressed confidence that good progress was being made in talks. He said:
‘All in all the contours of an agreement and a deal on the Withdrawal Agreement are becoming clearer and clearer, which is a positive.’
However, EU Chief Negotiator Michel Barnier indicated that the issue of the Northern Ireland border and backstop was still a major sticking point in talks.
This, as well as concerns that the EU was still preparing for the possibility of a ‘no deal’ Brexit, prevented the Pound from holding its best levels against the US Dollar last week.
US Dollar (USD) Exchange Rates Benefit from ‘Safe Haven’ Demand
Towards the end of last week, global geopolitical concerns and trade uncertainties worsened again – and as a result investors once again bought the ‘safe haven’ US Dollar.
While there are concerns that US trade protectionism could have a negative impact on the US economy, the US economic outlook is among the strongest of major economies and as a result the US Dollar has been among the most appealing ‘safe havens’.
US-China trade tensions flared up again, US-Canada trade relations were shaky, and a selloff of emerging market currencies from earlier in the week all kept the US Dollar sturdy.
On top of this, the latest US data continues to print strongly.
Friday’s US Chicago PMI and Michigan consumer sentiment prints largely beat expectations, which helped the US Dollar in its slight Friday recovery against the Pound.
Pound to US Dollar (GBP/USD) Forecast: Brexit Developments Will Continue to Drive Sterling
As UK and EU Brexit negotiations are set to accelerate, upcoming Brexit developments could once again be the main cause of Pound to US Dollar (GBP/USD) exchange rate movement.
The Pound is more likely to continue its rally against the US Dollar if there are any signs that Brexit negotiations are seeing improved progress.
However, if ‘no deal’ Brexit fears are rekindled by difficulties in negotiations or fissures in UK Parliament, the Pound could shed more of its recent gains.
The US Dollar, on the other hand, could remain appealing amid ‘safe haven’ demand if global trade tensions continue to worsen.
Some influential ecostats will be published throughout the week too, but these would need to be particularly surprising to have a big influence on the GBP/USD outlook.
UK manufacturing PMI data will be published on Monday, with US manufacturing following on Tuesday. UK services figures will come in on Wednesday and the US non-manufacturing PMI will be published on Thursday.
The week will be rounded off with the typically influential US Non-Farm Payroll report on Friday, but unless the data is highly disappointing it is unlikely to have a big impact on the Pound to US Dollar (GBP/USD) exchange rate.
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