As Brexit negotiations continue to make the headlines, the Pound has traded tightly against the US Dollar. This lack of definitive movement comes as both the UK and US face significant economic and political challenges in the near-future.
UK Economic Outlook: Pound Losses Possible if Brexit Talks Turn Sour
Looking ahead, the Pound might find itself unsettled by the progression of Brexit talks. Recently, the EU’s lead negotiator Michel Barnier has set alarm bells ringing by stating that the UK might need to be ‘educated’ about the consequences of leaving the EU single market.
In the ongoing war of the words between UK and EU officials, Barnier has stated that;
‘There are extremely serious consequences of leaving the single market and it hasn’t been explained to the British people. We intend to teach people…what leaving the single market means’.
While this statement has been highly ambiguous, the implication is that EU officials could try and impose a punitive Brexit deal on the UK as a way of warning other countries that consider leaving the multinational union.
If it looks like Brexit might bring a sting in the tail for the UK then the Pound could drop against the Euro, particularly if UK officials do not seem worried about these ‘extremely serious consequences’.
North Korean Aggression brings Fears of US Conflict Escalation
The ongoing tension between the US and North Korea could escalate further in the future, which brings with it the risk of higher volatility for the US Dollar.
North Korea has recently conducted what is allegedly its largest ever nuclear test, which raises the danger of the country actively threatening the world with nuclear weaponry.
On social media, President Donald Trump has given his thoughts, stating that North Korea is a ‘rogue nation which has become a great threat and embarrassment to China. The United States is considering…stopping all trade with any country doing business with North Korea’.
On the military side, Defence Secretary James Mattis has threatened a ‘massive response’ to further nuclear threats, which has done little to diffuse concerns about the situation.
If this present tension continues to build then the US Dollar could progressively weaken, given that any possible clash between the US, North Korea or China, one of North Korea’s key benefactors, could provoke a possible nuclear conflict.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading at 1.2948 and the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7722.
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