The Pound has lost ground to the US Dollar today, but a GBP/USD rate rise remains on the table for late-week trading.
This is largely dependent on the decisions of EU leaders, as they consider the crucial matter of the UK’s progress in Brexit talks.
Brexit Progress Approval at EU Summit could Trigger GBP/USD Rally
The Pound has slipped against the US Dollar at the start of this week, but has a chance to recover over Thursday and Friday.
This is when EU leaders will be holding a summit to discuss the UK’s progress in Brexit talks, among other issues.
The matter at hand is whether EU officials believe that the UK has made enough progress in ‘phase one’ of Brexit negotiations to move onto ‘phase two’.
If EU leaders do approve of UK progress so far (primarily over the last two weeks), then the Pound could rise sharply.
The key topic of phase two discussions is post-Brexit trade, something that UK officials have wanted to start discussing since the very beginning of talks with the EU.
There were reports last week that UK-EU trade talks wouldn’t begin until February next year, but approval would still have a strong supportive effect on the GBP/USD rate.
Outside of this event, UK inflation and earnings stats are out this week, along with a Bank of England (BoE) interest rate decision on Thursday.
Given the importance of the EU summit, however, traders could largely ignore the data on offer and keep their eyes on the late-week meeting.
Is a USD/GBP Rate Rise Incoming on the Fed Interest Rate Decision?
The US Dollar could be on track for an easy rise against the Pound this week, depending on the outcome of 2017’s last Federal Reserve interest rate decision.
The Fed will be making the key decision on Wednesday evening and traders have largely priced in a rate hike from 1.25% to 1.50%.
Although this outcome has been forecast for months now, it could still have a significant impact on the US Dollar’s value.
The Fed raising interest rates suggests that it believes the US economy is strong enough to handle such a change.
Higher interest rates will improve conditions for savers, but increase repayment costs for those in debt.
The US Dollar could see a brief advance against the Pound in the event of a Fed rate hike, which may be extended by implications of more rate hikes in 2018.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading at 1.3374 and the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7478.
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