GBP/USD Exchange Rate Surges on Bullish Barnier Brexit Comments
UPDATE: The Pound US Dollar (GBP/USD) exchange rate has climbed almost 1% this afternoon as markets react to EU chief negotiator Michel Barnier’s comments regarding the possibility of the EU reaching a Brexit deal with the UK in the near future.
Speaking in Slovenia, Barnier suggested that it is ‘realistic’ that the UK and EU could reach a Brexit agreement within six to eight weeks, prompting a market uptick in Sterling sentiment.
However it remains to be seen if the jump in GBP will prove to be anything more than a dead cat bounce, with Barnier having been quick to backtrack on his statements in recent weeks.
Pound US Dollar (USD) Exchange Rate Firms as UK GDP Accelerates
The Pound US Dollar (GBP/USD) exchange rate has started this week’s session on a solid footing, with Sterling edging higher following the release of the UK’s latest GDP reading.
According to data published by the Office for National Statistics (ONS) the UK economy expanded 0.3% in July, resulting in GDP rising at its fastest pace in nearly a year as growth reached 0.6% in the three months to July.
#ONS data show UK economy growing 0.6% in three months to July, an improvement that was broadly in line with PMI, which points to slight moderation in growth going forward, but still solid expansion so boding well for Q3 #GDP to at least match the 0.4% increase seen in Q2 pic.twitter.com/GlBxdJzVdW
— Chris Williamson (@WilliamsonChris) September 10, 2018
This acceleration in growth was attributed to the warm weather as well as the World Cup as they resulted in people spending more of their discretionary income.
Rob Kent-Smith, head of GDP at the ONS said:
‘Growth in the economy picked up in the three months to July. Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup.’
GBP/USD Exchange Rate Fluctuates as Brexit Sentiment Picks Up although Decent GDP Growth Provides Some Support this Morning
The Pound US Dollar (GBP/USD) exchange rate initially plummeted last week as Sterling sentiment was pressured by some weaker-than-expected UK PMI figures.
This coincided with growing global trade tensions at the start of the week, which saw losses in GBP/USD as safe-haven demand bolstered the appeal of the US Dollar.
However the middle of the week saw the Pound recoup a large portion of its losses as a report from Bloomberg said the UK and Germany would be willing to ‘accept a less detailed agreement on the UK’s future economic and trade ties with the EU in a bid to get a Brexit deal done.’
This upswing in Brexit sentiment was then further boosted by comments from the EU’s chief negotiator Michel Barnier, when he stated that the EU wanted the ‘closest relationship possible’ with the UK.
However despite the further upswing in Brexit optimism the GBP/USD pairing was unable to fully recover as the release of some robust US payroll figures saw the US Dollar firm at the very tail end of the session.
GBP/USD Exchange Rate Outlook: Will Upbeat UK Labour Figures Bolster Sterling?
Looking ahead to the remainder of the first half of this week’s session, the release of the UK’s latest labour figures are likely to be the main catalyst for movement in the Pound US Dollar (GBP/USD) exchange rate.
Economists currently forecast that July’s report will see the UK’s unemployment rate hold at a 43-year low of 4%, while also delivering a slight uptick in wage growth, likely strengthening the Pound (GBP).
Meanwhile the second half of the week will see the conclusion of the Bank of England’s (BoE) latest policy meeting.
With the bank having voted to raise interest rates just last month, this week’s meeting is unlikely to result in any policy changes, potentially weakening Sterling if the bank uses the meeting to again warn of the dangers of a no-deal Brexit.
The latter half of the week will also bring the release of the latest US CPI figures, with the US Dollar (USD) likely to strengthen if domestic inflation is reported to have remained robust in August, as expected.