Pound Sterling to US Dollar (GBP/USD) Exchange Rate Holds Above Week’s Opening Levels Despite Brexit Jitters

Pound to US Dollar Exchange Rate Avoids Losses Amid Broad US Dollar Weakness

UPDATE: The US Dollar (USD) has been one of this week’s worst-performing major currencies so far, and this has helped the Pound Sterling to US Dollar (GBP/USD) exchange rate to avoid losses despite Brexit jitters weakening Sterling (GBP).

In fact, GBP/USD trended above the week’s opening levels at the time of writing. If the US Dollar’s weakness persists, GBP/USD may be on track to end the week higher even as next week’s UK Parliament vote on Brexit approaches.

The US Dollar weakened further on Thursday, as Wednesday’s Federal Reserve meeting minutes report revealed that many policymakers were uncertain about hiking US interest rates further in 2019.

Pound to US Dollar Exchange Rate Climbs Again Despite Persisting Brexit Uncertainties

UPDATE: Demand for the Pound (GBP) remained limited today, with the UK Parliament debate on Theresa May’s deal resuming and Brexit uncertainties persisting.

However, the Pound Sterling to US Dollar (GBP/USD) exchange rate was able to advance regardless, as investors sold the US Dollar (USD).

Signs of optimistic developments in US-China trade negotiations, as well as speculation that a trade deal could be announced as soon as the World Economic Forum in two weeks, left the safe haven US Dollar unappealing.

Pound to US Dollar Exchange Rate Sheds Weekly Gains as Brexit Fears Persist

Earlier in the week, the Pound Sterling to US Dollar (GBP/USD) exchange rate trended with an upside bias. The Pound (GBP) was supported by hopes that a ‘no-deal’ Brexit could be avoided, while the US Dollar (USD) tumbled.

However, by the middle of the week GBP/USD slumped back down to trend nearer the week’s opening levels once again.

Despite some hopes that the UK would avoid leaving the EU without a trade deal, concerns persisted that the Brexit process was still full of uncertainties ahead of next week’s key vote.

On top of this, the safe haven US Dollar strengthened again in the middle of the week following days of losses.

This came as investors anticipated the publication of the Federal Reserve’s latest meeting minutes report, although its gains proved to be limited.

Pound (GBP) Investors Remain Anxious about Brexit Outlook

Parliament’s debate on Prime Minister Theresa May’s negotiated Brexit deal is resuming this week, following MPs’ break for winter recess.

However, with a perceived lack of support for her deal and less than three months until the UK is set to leave the EU, uncertainties about how the process will unfold and the future of Britain’s economy are keeping Sterling (GBP) under pressure.

This week so far, Parliament has voted in favour of a Finance Bill amendment, tabled by a cross-party group, which would limit the government’s taxation options in the event that it heads towards a ‘no-deal’ Brexit.

Sterling briefly found support in this news, but the amendment was ultimately perceived as having little change to the chances of ‘no-deal’.

Theresa May is struggling to find the support she needs to pass her Brexit deal through Parliament in next week’s vote. If her deal is defeated, a ‘no-deal’ remains an option.

US Dollar (USD) Exchange Rates Firm as Investors Anticipate Federal Reserve Meeting Minutes

The US Dollar (USD) more easily pushed the Pound (GBP) lower today as investors firmed on the US currency again, following days of losses at the end of last week and the beginning of this week.

Investors are hesitant to keep selling or buying the US Dollar ahead of the publication of the Federal Reserve’s latest meeting minutes report.

In its December policy decision, the Fed confused markets by indicating it would hike US interest rates at least twice more in 2019, despite signs of slowing global and US growth.

The Fed’s defiantly hawkish tone concerned analysts who had forecast a more cautious monetary policy path.

As a result, investors are highly anticipating the minutes of the meeting which could give more details about the bank’s surprisingly hawkish tone last month.

The US Dollar’s gains are limited though, as Fed interest rate hike bets remain low and development in US-China trade negotiations has left the safe haven US Dollar less appealing, with investors more willing to take risks.

Pound to US Dollar (GBP/USD) Exchange Rate Investors Anticipate Fed Minutes and Friday’s Data

With Theresa May’s Brexit deal being debated today and the Federal Reserve’s December meeting minutes due for publication this evening, the Pound to US Dollar (GBP/USD) exchange rate could see a bigger shift in tone towards the end of the week.

Any surprising Brexit developments ahead of next week’s parliamentary vote could of course influence the Pound’s (GBP) movement, although the Fed minutes are even more likely to cause movement.

The Fed’s tone in December surprised markets, so the details of the meeting are likely to be studied for the bank’s reasoning behind its hawkishness, or for signs of disagreement among policymakers.

If the Fed minutes happen to be convincingly hawkish, GBP/USD may be in for further losses in the coming sessions.

Friday’s UK growth data from November and US inflation data from December may also cause some late-week movement in the Pound to US Dollar (GBP/USD) exchange rate.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard