Week of Reckoning for GBP/USD, Boris Johnson Given Just Days to Revise Brexit Deal

GBP/USD Exchange Rate Undermined by No-Deal Brexit Fears

The Pound Sterling to US Dollar (GBP/USD) exchange rate is off to a poor start this week, weakening this morning as markets express doubts that Boris Johnson will be able to secure a Brexit deal.

At the time of writing the GBP/USD exchange rate is trading at around $1.2298, down around 0.3% from this morning’s opening rate.

Pound (GBP) Stumbles as Boris Johnson Given Until Friday to Present Revised Brexit Deal

The Pound (GBP) opens this week on the back foot as Brexit talks enter the end-game.

Negotiations look set to intensify this week after French President Emmanuel Macron told Boris Johnson over the weekend that the EU would make a decision on Brexit ‘at the end of the week’.

Johnson presented his ‘final’ Brexit offer to the EU last week, but EU Leaders said that the proposals still didn’t go far enough on a few key sticking points.

GBP investors appear pessimistic on the chances of the UK and EU being able reach a working solution this week.

Markets also fear that Johnson could try and circumvent a law compelling him to request a Brexit extension if a deal is not passed by Parliament by 19 October, the prospect of which is also limiting the appeal of GBP this morning.

US Dollar (USD) Muted Amidst Fed Rate Cut Speculation

Meanwhile, the US Dollar (USD) is showing only limited movement at the start of this week, in response to rising expectations that the Federal Reserve will cut interest rates again this month.

The Fed has slashed rates twice in its previous two meetings in an effort to shield the US economy from a wider global slowdown, brought on by the US-China trade dispute.

However despite this, recent US economic data has grown increasingly gloomy. Releases last week revealed that a contraction in the US manufacturing sector deepened last month, whilst also indicating that the US jobs market is slowing.

This has propelled the odds of an October rate hike to around 80% according to the CME Group’s FedWatch tool.

USD investors will look to Jerome Powell to possibly shine more light on whether the bank will continue to cut rates this month, when the Fed Chairman speaks later this evening.

GBP/USD Exchange Rate Forecast: US-China Trade Talks in Focus

While Brexit talks are sure to be a key catalyst of movement in the Pound US Dollar (GBP/USD) exchange rate this week, there is another set of negotiations which could be almost equally influential.

These will be the high-level US-China trade talks taking place in Washington later in the week.

There’s a sense of optimism going into the latest round of negotiations after White House economic adviser Larry Kudlow suggested there has been a ‘softening in the psychology’ of talks, with some observers speculating on the possibility of an interim deal.

However should talks fail to progress at a sufficient pace then it’s likely we could see the US Dollar weaken in response.

Meanwhile, also on the radar for GBP investors this week will also be the UK’s latest GDP figures, with the Pound potentially weakening if UK economic growth stalled in August as suspected.

Matthew Andrews

Contact Matthew Andrews