The Pound has posted a 0.3% rise against the US Dollar today, but stands to face turbulence in both the near and long-term. This will come from emerging details about the Brexit process, as well as an imminent speech in the US.
Pound may Drop if Brexit Bill is Considered Too High
A recent update in Brexit proceedings may result in the Pound declining in the future, depending on how it is received by economists.
This has been Foreign Secretary Boris Johnson conceding that the UK should pay a ‘divorce bill’ to the EU, a reversal of his previous opinion. In Johnson’s words;
‘[The UK will pay] not a penny more, not a penny less. Of course we will meet our obligations, we are law-abiding, bill-paying people. The UK has contributed hundreds of billions over the years…well, we will certainly meet our obligations.
I can give…an absolute clear, precise answer and that is we should not pay more…or less of what we think our legal obligations amount [to]’.
While this might facilitate a smoother exit from the EU for the UK, the exact sum of such a bill is still unknown, which means that the nation may face an astronomical sum as a parting shot.
US Dollar may Drop Sharply on Yellen Comments
The US Dollar is tipped to move dramatically against the Pound in the near-term, depending on what happens at the Jackson Hole Symposium.
The main event will be a speech by Federal Reserve Chair Janet Yellen, who has the potential to cause high USD turbulence.
Amid talk that this could be Yellen’s last appearance at the annual event, speculators have been looking at what Yellen might say. Among these has been Paul Sheard of Standard and Poor’s Global;
‘Financial stability is really important. If you have a financial crisis and you have financial instability, you really throw the economy into a lot of turmoil and you can’t be achieving your objectives. One of Yellen’s great achievements was to communicate how the Fed would go about starting to unwind its balance sheet, to lay out the principles and start the process.
[Today, I hope] there are some substantive kinds of thoughts and analysis than just the normal boilerplate stuff that you get from central bankers. If it is her last Jackson Hole speech, leaving some legacy in terms of a speech that has a longer shelf life, that’s what you’d look for’.
If Yellen hints at tightening monetary policy then the US Dollar could appreciate, although from Sheard’s predictions a cautious outlook could well be on the way.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading at 1.2833 and the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7793.
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