Pound Sterling US Dollar Exchange Rate Consolidates Above $1.23 as UK Government Seeks Brexit Deal

GBP/USD Exchange Rate Steady amidst Diminishing Brexit Fears

The Pound Sterling to US Dollar (GBP/USD) exchange rate remains stable this morning as fears of the UK crashing out of the EU on 31 October continue to fade.

At the time of writing the GBP/USD exchange rate is trading at around $1.2351, virtually unchanged from this morning’s opening levels.

Upbeat Backstop Comments Buoy the Pound (GBP)

After racing higher over the past week, the Pound (GBP) appears content to consolidate its position as no-deal Brexit fears continue to ease.

There may be some room for Sterling to still move higher however following signs the UK government is seeking a Brexit deal with renewed vigour, in order to prevent Boris Johnson from having to request another extension to the Brexit deadline.

Evidence of this comes from UK Business Secretary Andrea Leadsom, who appeared upbeat on the chances of finding an acceptable solution to the Irish backstop.

‘We are looking at creative ways to ensure no Irish backstop. We are looking at getting a good deal that works for the UK that is different to existing one. Our absolute focus is on getting a good deal on Oct. 17 when the EU Council meets.’

While we have heard similar things before, German Chancellor Angela Merkel added to the sense of optimism, telling reporters this morning ‘we still have every chance of an orderly Brexit’.

Meanwhile, also proving supportive of GBP exchange rates this morning are reports suggesting parliament may hold a vote on whether to hold a second referendum in October.

Cautious Trade Offers Support to the US Dollar (USD)

The recent selling bias surrounding the US Dollar (USD) appears to have finally been lifted over the past couple of days.

This comes as investors have grown increasingly cautious this week ahead of a series of central bank meetings over the next couple of weeks.

Markets are particularly nervous ahead of the European Central Bank’s (ECB) policy announcement on Thursday, helping to prop up demand for the safe-haven US Dollar this morning.

GBP/USD Exchange Rate Forecast: US Dollar to Rise on Robust US Inflation Figures

Looking ahead, likely to act as the main catalyst of movement in the Pound US Dollar (GBP/USD) exchange rate on Thursday will be the publication of the latest US consumer price index (CPI).

Economists forecast the CPI figures will report headline inflation will have remained steady at 1.8%, while core inflation may have crept up from 2.2% to 2.3%.

This would put underlying inflation at a one-year low and is likely to limit the appetite for further monetary easing within the Federal Reserve, and result in the US Dollar moving higher.

In the absence of any notable domestic economic data, we will likely see GBP investors continue to look to UK politics for direction, potentially limiting momentum now that parliament has been suspended for five weeks.

Matthew Andrews

Contact Matthew Andrews