GBP/USD Exchange Rate lifted by Brexit Optimism in Lift of Possible Customs Deal
UPDATE: The Pound US Dollar (GBP/USD) exchange rate is clawing its way back up from a two-week low this afternoon as Sterling sentiment was lifted by a report the EU may offer a UK-wide customs union in an effort to sidestep the issue of an Irish backstop.
However limiting the upside to GBP was the caveat that such a deal would need to negotiated as part of a separate treaty.
Further holding back GBP/USD was the announcement that the European Commission had formally rejected Italy’s 2019 budget, fueling demand for safe-haven currencies such as the US Dollar.
GBP/USD Exchange Rate Slumps Amid Threats of Possible Leadership Challenge
UPDATE: The Pound US Dollar (GBP/USD) exchange rate is beating a hasty retreat this morning amidst reports Theresa May could face a possible vote of no confidence this week.
Societé Generale 1/2: Theresa May remains under pressure in the UK after another awful weekend for newspaper headlines. A ‘#Brexit deal appears closer but whether she can sell the deal to her party is a completely different question. #GBP #sterling #pound #GBPUSD #EURGBP pic.twitter.com/WFnXl81jiS
— Francesc Riverola – FXStreet.com ? (@Francesc_Forex) October 22, 2018
Pressure has been piling up against the PM in recent weeks as both pro-Brexit and pro-remain MPs begin to ramp up the criticism of her Brexit plans.
While this will not be the first time May has faced a possible leadership contest, the current flaring political tempers appear to have given this particular threat more bite than previous attempts to dethrone the PM.
GBP/USD Exchange Rate Pressured by Mixed Data, Brexit Uncertainty
The Pound US Dollar (GBP/USD) exchange rate got off to a shaky start last week, with Sterling initially weakening at the start of the week following a breakdown in the latest round of Brexit talks.
Fortunately for GBP investors the release of the UK’s latest employment figures saw the Pound quickly bounce back on Tuesday as domestic wage growth was shown to have leapt to a nine-year high in August.
Sterling gains proved to be unsustainable however, with GBP retreating again in the middle of the week as UK inflation came in below expectations, weakening market expectations of a rate hike from the Bank of England (BoE) early next year.
These losses then accelerated sharply on Thursday, with GBP/USD striking a two-week low as the latest EU summit of leaders ended without Theresa May securing an emergency Brexit summit for November, dampening hopes a deal could be in place by the end of the year.
The uncertainty surrounding Brexit as well as concerns regarding Italy’s draft budget saw investors flock to safe-haven currencies, which coupled with some hawkish minutes from the Federal Reserve helped to buoy USD demand throughout last week’ session.
Pound (GBP) Exchange Rates Rangebound as Markets Await May’s Brexit Update
The Pound (GBP) found some momentary respite against the US Dollar (USD) and the majority of its other peers at the start of this week’s session as investors await a speech by Theresa May in the House of Commons.
The Prime Minister is set to update the Commons on the current state of Brexit and is expected to tell MP’s that ‘95% of the withdrawal agreement and its protocols are now settled.’
However it remains this last 5% that will be key for the Pound, with markets looking for any signs that progress is being made to resolve the Irish border issue.
GBP/USD Exchange Rate Forecast: US GDP Figures in Focus this Week
Looking to the week ahead, in terms of data the main focus for markets this week will be the publication of the latest US GDP figures on Friday.
Friday’s figures will provide the first indication of whether the stellar growth seen in the second quarter will manage to carry forward, with the US Dollar (USD) likely to appreciate should GDP print close to 4% again.
Meanwhile in the absence of any notable data GBP investors are likely to remain transfixed by Brexit this week, something which will likely result in further weakness in the Pound US Dollar (GBP/USD) exchange rate unless some positive progress begins to be made in talks.