Pound Sterling to US Dollar (GBP/USD) Exchange Rate Near February Best

Pound to US Dollar Exchange Rate Sustain Gains as US Industry Disappoints

Thanks largely to hopes for progress in the Brexit process, the Pound Sterling to US Dollar (GBP/USD) exchange rate has climbed this week and looks on track to sustain most of its weekly gains thanks to strong UK data and mixed US data.

Since opening the week at the level of 1.28, GBP/USD has climbed over a cent. While GBP/USD has been unable to hold its best level since the beginning of February seen on Wednesday, the pair remains fairly close to those highs.

Investors were hesitant to buy the US Dollar (USD) too much throughout the week, amid signs that the US and China were getting closer to reaching some kind of trade deal and making investors more eager to buy riskier investments.

This made it easier for Sterling (GBP) to hold most of its weekly gains, on hopes that the UK could bolster the popularity of its soft Brexit plan as soon as next week.

Pound (GBP) Exchange Rates Sustain Gains on Brexit Hopes

The Pound (GBP) saw a jump in demand on Tuesday, and has largely sustained those gains since then.

Investors bought the Pound in reaction to speculation that the UK government and EU were closer to some kind of breakthrough in Brexit talks.

Hopes have risen that the wording of the Brexit deal could change enough to bolster its support in Parliament, and help the government’s soft Brexit plan to pass and avert a No-deal Brexit.

Towards the end of the week, UK officials indicated that talks were going well and that Parliament may even be able to vote on a revised deal as soon as next week.

This news helped the Pound to hold Tuesday’s gains, though some recent UK stats supported Sterling as well.

Thursday’s public sector net borrowing results beat expectations and printed the best budget surplus on record.

US Dollar (USD) Exchange Rate Strength Limited by Underwhelming Manufacturing Stats

The US Dollar (USD) saw a brief rise in demand in the middle of the week, as the Federal Reserve’s latest meeting minutes were generally optimistic about the US economy and labour market.

The central bank’s tone was optimistic enough to bolster speculation that it could still hike US interest rates at least once in 2019.

However, ultimately the bank’s tone was not perceived as being notably different from the tone the bank took in the policy decision itself, so had little impact on the US Dollar outlook.

Thursday saw the publication of some notable US ecostats. While the data was mixed overall, the manufacturing and industry data largely fell short of expectations. This prevented the US Dollar from pushing GBP/USD down towards the end of the week.

December’s durable goods orders only rose to 1.2% rather than the expected 1.5%. Markit’s manufacturing PMI projection unexpectedly slowed to 53.7, and Philadelphia Fed’s manufacturing index contracted at -4.1.

Pound to US Dollar (GBP/USD) Exchange Rate Investors Await Brexit News and US Data

Next week is likely to be another week in which Brexit developments will drive the Pound to US Dollar (GBP/USD) exchange rate.

With February drawing to an end, it will also mean that time will be running even lower on the Brexit clock; with only a month left until the formal Brexit date.

The Pound (GBP) could see a surge in demand if there are any major developments in the Brexit process.

Investors are particularly hoping for the UK government’s Brexit plan to become popular enough to pass through Parliament, or for the formal Brexit day to be officially delayed past its current March 29th’s date.

The US Dollar (USD), on the other hand, is more likely to be driven by US data.

Wholesale inventories and Dallas Fed manufacturing stats will come in on Monday, with other manufacturing stats and growth stats due later in the week.

If upcoming US data disappoints investors, the Pound to US Dollar (GBP/USD) exchange rate will be more likely to hold its ground. Stronger US data could bolster Fed interest rate hike bets and push GBP/USD lower though.

Josh Jeffery

Contact Josh Jeffery