Chance for GBP/USD Exchange Rate Rise on UK GDP Growth
After a poor finish to last week, the Pound to US Dollar (GBP/USD) exchange rate has started to recover thanks to the latest Brexit news.
It is unclear if this positive sentiment will last for the week, but the Pound could still advance against the US Dollar when Friday’s economic data comes out.
This will consist of finalised Q2 GDP growth figures, which are expected to confirm rising activity on the quarter and the year.
Higher GDP could push the GBP/USD exchange rate higher, although consistent growth is still needed before Sterling can fully recover from last week’s losses.
Revision of UK’s Brexit Plans could Trigger GBP/USD Exchange Rate Rise
Less concretely, the Pound (GBP) might also rise against the US Dollar (USD) if there are any positive Brexit announcements this week.
In the ideal world, UK and EU negotiators will take a different tack in talks and propose better deals than the ‘Chequers plan’, which was categorically rejected last week.
The idea of a fresh take on the Brexit process has already been floated by Shanker Singham of the Institute for Economic Affairs (EIA).
Outlining his new plan for Brexit, Mr Singham said:
‘Our proposal is designed to avoid a hard border in the island of Ireland, and we have an extensive section on how you would deal with the Irish border.
‘We are talking about things on the Irish border that actually operate in the rest of the world.
‘Every day these mechanisms are used, and we believe that … if you do all of the things we suggest, you will avoid hardening the border.’
If this seemingly-viable plan is approved, or similar variants are proposed, then the Pound could rise against the US Dollar.
GBP traders are still worried about a potential no-deal Brexit in the future, so any signs of a future full Brexit agreement could restore confidence and push the Pound up.
Will US Dollar to Pound (USD/GBP) Exchange Rate Rally on Fed Interest Rate Hike?
The US Dollar (USD) could rise against the Pound (GBP) this week on Wednesday evening, when the Federal Reserve will be making its September interest rate decision.
Fed policymakers are expected to hike interest rates from 2% to 2.25%, which would be the third rate hike in total this year.
Higher Fed interest rates could lead to the US Dollar rising sharply against the Pound and recovering from the recent USD/GBP exchange rate dip.
US Dollar traders are anticipating four total interest rate hikes this year and higher rates in September would put the Fed on track to meet these expectations.
The Fed won’t adjust rates in October, but could further support a USD/GBP exchange rate rise if policymakers hint at a fourth rate hike in November or December.
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