GBP/USD Exchange Rate Weakens Ahead of Boris Johnson’s Brexit Speech
The Pound Sterling to US Dollar (GBP/USD) exchange rate opens this week on the defensive ahead of a speech from Boris Johnson, outlining his vision for a post-Brexit trade deal with the EU.
At the time of writing the GBP/USD exchange rate is trading at around $1.3101, down roughly 0.7% from this morning’s opening levels.
Pound (GBP) Slumps as Johnson Seeks to Strike a Hard Line in Trade Talks
The Pound (GBP) is under some significant pressure this morning as markets brace for a speech from Boris Johnson, in which he is expected to set the tone for phase two of Brexit negotiations.
Johnson will use his speech to call for a Canada-style free trade agreement with the EU, but reaffirm his commitment not to accept EU rules.
UK will refuse close alignment with EU rules, Johnson to say https://t.co/KH66S2DqDI
— Guardian politics (@GdnPolitics) February 2, 2020
Johnson will say:
‘We have often been told that we must choose between full access to the EU market, along with accepting its rules and courts on the Norway model, or an ambitious free trade agreement, which opens up markets and avoids the full panoply of EU regulation, on the example of Canada.
‘There is no need for a free trade agreement to involve accepting EU rules.’
The PM will also threaten to walk away from talks and revert to World Trade Organisation (WTO) terms if it such a deal cannot be struck, reigniting fears the UK could face a no-deal Brexit at the end of the year.
President of the European Commission Ursula von der Leyen has said that for a close relationship with the EU, the UK would inevitably have to accept some of the bloc’s rules.
EU chief negotiator Michel Barnier will also outline the EU’s approach to trade talks today, and GBP investors will be eager to see how these may contrast with Johnson’s approach.
US Dollar (USD) Buoyed by Coronavirus Fears
At the same time, the US Dollar (USD) opens this week’s session well supported as demand for the safe-haven currency rises amidst a risk-off mood in markets.
This comes in part due to continued concerns over the impact of the coronavirus outbreak on the global economy, with the People’s Bank of China announcing a new stimulus package earlier today in order to cushion the impact on China’s economy.
Further buoying demand for the US Dollar was the release of China’s latest manufacturing PMI, which came in below expectations last month.
GBP/USD Exchange Rate Forecast: Weak ISM Manufacturing PMI to Dent the ‘Greenback’?
Still on the docket for today is the publication of the latest ISM manufacturing PMI, giving investors their first glimpse at how the US economy is faring at the start of 2020.
The release could help to reverse some of the losses in the Pound to US Dollar (GBP/USD) exchange rate later this afternoon as economists forecast the US factory sector will have suffered its sixth consecutive contraction in January.
Meanwhile, the release of the UK’s construction PMI could offer some modest support to Sterling on Tuesday, if it shows the construction sector moved closer to growth last month.