After failing to benefit from typically good news for most of the week, the Pound to US Dollar exchange rate edged higher on Friday. Pound demand improved after UK Prime Minister Theresa May made an offer about EU citizens’ rights in the UK post-Brexit. GBP USD has now recovered over a cent from the week’s low of 1.2590 and trends above the level of 1.27.
Pound (GBP) Outlook Higher as UK Prime Minister Talks Citizen Rights
Concerns that the Brexit process would lead to a cliff-edge scenario for EU nationals living in Britain lightened this week, as UK Prime Minister Theresa May made an offer to EU leaders at a summit in Brussels.
Formal Brexit negotiations finally begun at the beginning of the week, but May’s comments towards the end of the week revealed a key position on something EU leaders considered a major priority in negotiations.
May reportedly made a ‘fair and serious offer’ about the rights of EU citizens. It would allow citizens already living in the UK up until the Brexit process ends to gradually work their way up to attaining the same rights as British citizens.
It would leave the citizens as a special type of ‘settled status’ that includes work rights, pensions, NHS care and other public services for life.
This news slightly bolstered Pound appetite as Brexit negotiations have been perceived as starting off positively. This was also good news for businesses and employers who will likely not have to worry about a portion of Britain’s workforce suddenly leaving.
Further developments in Brexit negotiations will of course continue to affect the Pound outlook. Sterling will be stronger in the long-term if Brexit negotiations go smoothly or if the UK government’s Brexit stance softens.
US Dollar (USD) Traders Await more Fed Signals
The US Dollar weakened towards the end of the week, allowing the Pound to US Dollar exchange rate to more easily recover from the week’s lows.
Earlier in the week, New York Federal Reserve President William Dudley argued that inflation and wage growth would likely rebound in the coming months and better support the possibility of another 2017 interest rate hike from the Fed.
This boosted the US Dollar, but the comparative dovishness of other Fed officials as well as a lack of impressive US data or other reasons to increase Fed rate hike bets has left the US Dollar weak.
Bets of a third 2017 rate hike from the Federal Reserve have remained under 50% this week. Many investors have speculated that as US inflation slows and other ecostats fail to meet expectations, the Fed may not succeed in its previous plan of three rate hikes throughout the year.
Some analysts have predicted that markets could be waiting for a long time before the US Dollar outlook changes in any real way.
However, while the long-term outlook is uncertain, key data due for publication over the next week could influence direction in USD trade or Fed rate hike bets.
Durable goods orders from May will be published on Monday, followed by final Q1 Gross Domestic Product (GDP) stats on Thursday. Michigan’s final June surveys due next Friday could also influence Fed rate hike bets as they include inflation expectations figures.
GBP USD Interbank Rate
At the time of writing this article, the Pound to US Dollar exchange rate trended in the region of 1.2734. The US Dollar Pound exchange rate traded at around 0.7850.
Comments are closed.