Pound US Dollar (GBP/USD) Exchange Rate Climbs as US Fed Sends Out Mixed Signals

Pound US Dollar (GBP/USD) Exchange Rate Rises as Brexit Optimism Holds and US Fed Cautious

The Pound (GBP) held on to yesterday’s gains today following Prime Minister Theresa May’s announcement that MPs could vote on a possible extension to Brexit, or remove no-deal from the table.

Today, meanwhile, has seen May’s deal gain some unlikely support from the Eurosceptic Tory MP Jacob Rees-Mogg, who said he would back her deal if there is a time-limit on the Northern Irish backstop.

The US Dollar (USD), meanwhile, continued to struggle against the Pound today the Chair of the Federal Reserve, Jerome Powell, sending out mixed signals in his testimony before Congress yesterday.

Powell struck a dovish tone, saying that the recent government shutdown could have negative effects, which, he said, will ‘unwind over the next several months’.

US Dollar traders will be awaiting the publication of US factory orders figures for December, which are expected to increase, while Jerome Powell will face his second-leg of testimony before Congress today.

Pound US Dollar Exchange Rate Rises as May Offers MPs Ability to Extend Brexit

UPDATE: The Pound held on to its gains today following Prime Minister Theresa May’s statement today in which she offered MPs the ability to extend the UK’s departure if her deal is rejected next month.

May warned against this, however, saying:

‘An extension beyond the end of June would mean the UK taking part in the European Parliament elections. What kind of message would that send to the more than 17 million people who voted to leave the EU nearly three years ago now?’

The US Dollar, meanwhile, failed to gain back on the Pound today following disappointing US housing starts change figures for December, which fell well below the expectation of -0.5% to -11.2%.

These were followed by US housing starts for December which also slipped below expectation to 1.078 million.

GBP/USD Exchange Rate Rises as Upbeat US-China Trade Talks Limit Safe Haven Demand

The Pound USD Dollar (GBP/USD) exchange rate edged higher today and is currently trading around $1.3192. USD has continued to weaken as President Donald Trump said that a trade deal between the US and China was ‘very, very close’,

As safe havens such as the US Dollar become less appealing, many traders have been seeking out riskier currencies instead. This came following Trump’s announcement yesterday that he would delay tariffs on US$200bn of Chinese exports to the US.

The Pound meanwhile jumped on Brexit optimism this morning, as Prime Minister Theresa May comes under increasing pressure ahead of her speech today. Reports are also suggesting a possible extension of Article 50 after a number of Tory ministers have threatened to resign.

These were also followed by the Labour leader Jeremy Corbyn vowing to back a second-referendum, further easing fears of a possible no-deal Brexit.

Mr Corbyn said:

‘One way or another, we will do everything in our power to prevent no deal and oppose a damaging Tory Brexit based on Theresa May’s overwhelmingly rejected deal.’

‘Greenback’ investors will be awaiting the Chair of the Federal Reserve, Jerome Powell, who is due to testify before Congress. Any bullish comments from him could see the USD claw back some of its losses.

Today will also see the publication of the US building permits figures for December, which are expected to decrease.

Pound US Dollar (GBP/USD) Exchange Rate Soars on Article 50 Extension Hopes

Today will see the UK Treasury Committee’s inflation report hearings, and if there are any upbeat talk about the UK economy, this could prove Pound-positive.

However, with Theresa May’s speech in the spotlight, pressures from ministers threatening to resign if she fails to remove possibility of no-deal.

Margot James, the Conservative Digital Minister, along with ministers Richard Harrington and Claire Perry, have all called for an extension of Article 50, saying in a joint statement:

‘All of us are agreed that we couldn’t be part of a government that allowed the country to leave the European Union without a deal.’

James, however, remains hopeful that Theresa May will heed these demands and offer concessions, perhaps removing the possibility of a no-deal or extending the Brexit process.

These hopes have buoyed market optimism in Sterling today, with the Brexit deadlock being increasingly challenged from all angles.

Wednesday will also see an amendment put forward by Labour’s Yvette Cooper that would effectively rule out a no-deal Brexit.

GBP/USD Forecast: Pound Could Rise Further on Brexit Developments

The GBP/USD exchange rate is likely to be dictated by Brexit developments this week, and with any developments surrounding either an extension to Article 50 or the remove of a no-deal, this could see the Pound further soar.

USD traders, meanwhile, will be awaiting the publication of the nondefense capital goods orders excluding aircraft for January tomorrow, with any signs of improvement providing some uplift for the ‘Greenback’.

David Moore

Contact David Moore