GBP/USD Exchange Rate Retreats as Realities of Brexit Negotiations Emerge
The Pound Sterling to US Dollar (GBP/USD) exchange rate is on the defensive this morning following comments from the UK and EU over the weekend in regards to work that still needs to be done to reach a Brexit deal.
At the time of writing the GBP/USD exchange rate is trading at around $1.2568, down roughly 0.6% so far this morning.
Pound (GBP) Give Reality Check, But Further Gains are Possible
The Pound (GBP) opens this week’s session on the back foot as markets begin to sober up following last week’s buying frenzy.
The GBP/USD was catapulted up by roughly three cents in the second half of last week amidst renewed Brexit deal optimism.
However in comments over the weekend, both the UK and the EU indicated that there is still some hurdles to be cleared before a withdrawal deal can be secured.
'Brexit: 'Big gap' remains in UK-EU deal discussions https://t.co/9Ah8U7at10
— BBC Politics (@BBCPolitics) October 13, 2019
UK Prime Minister Boris Johnson warned his cabinet that there is still a ‘significant amount of work’ that needs to be done, but that he can see ‘a way forward’.
Having arguably entered overbought territory at the end of last week, the Pound is certainty vulnerable to some selling in the short-term.
Of course this could be easily reversed should positive Brexit headlines begin to emerge once more, with Sterling poised to soar to new multi-month highs if a breakthrough in Brexit talks is reached.
US Dollar (USD) Buoyed by Partial US-China Trade Deal
Meanwhile, the US Dollar (USD) is off to a strong start this week in response to the positive outcome from US-China trade talks.
Following two days of high-level talks in Washington the two powers agreed upon a ‘phase 1’ trade deal.
The partial trade deal saw the two sides reach an agreement which covered agriculture, currency and intellectual property, but most crucially would see the US delay a planned hike of tariffs.
The US-China trade war is thought to have been a major contributing factor to the recent slowdown of the US economy, so the news that even a partial trade deal reflected positively on the US Dollar.
GBP/USD Exchange Rate Forecast: Brexit to Feature Heavily in Queen’s Speech
Coming up today, the Pound to US Dollar (GBP/USD) exchange rate could see some movement following as the Queen is due to lay out the government’s legislative agenda in a speech ahead of the reopening of parliament.
Brexit is expected to feature heavily in the speech, and may offer more insights into the sort of withdrawal deal currently being sought by Boris Johnson.
Outside of Brexit, the publication of the UK’s latest employment figures may also influence GBP exchange rates on Tuesday.
These might put some pressure on Sterling if wage growth is shown to have slowed in August as suspected.
For USD investors the focus in the first half of the week will be on the publication of the New York Empire State manufacturing index tomorrow afternoon.
This could put pressure on the US Dollar if factory growth in the region slowed again in October, increasing the pressure on the Federal Reserve to cut rates again this month.