The Pound to US Dollar (GBP/USD) exchange rate broke through a key barrier of resistance for the first time in a month last week thanks to optimism over another US fiscal stimulus package.
Added to this, cautious Brexit optimism also supported the Pound to US Dollar exchange rate, with GBP/USD hitting $1.30.
Last Week: US Dollar Undermined by Stimulus Optimism
The US Dollar faced a clear selling bias last week as upbeat market sentiment undermined the appeal of the safe-haven ‘Greenback’.
Donald Trump’s discharge from hospital initially cheered markets, but hopes for additional US fiscal stimulus really underpinned the positive mood last week.
This led the US Dollar to rebound in mid-week trade when Trump called a halt to stimulus talks, before retreating again later in the week as he subsequently tweeted that he sought a ‘bigger stimulus package’ than was currently being discussed by Republicans and Democrats.
The Pound, meanwhile, faced some volatility last week as a result of heightened Brexit uncertainty.
While the UK and EU ‘agreed on the importance’ of a trade deal, talks reportedly remained deadlocked on a few key issues.
Three Things to Watch Out for This Week
- Coronavirus Developments
As domestic coronavirus cases spike to alarming levels, the UK government looks set to impose fresh restrictions on the worst hit areas of the country this week, with concerns over how this may impact the UK’s economic recovery likely to hit the Pound.
- Brexit Uncertainty
Likely exerting additional pressure on Sterling sentiment will be the looming Brexit deadline as the UK and EU remain deadlocked on a number of key issues.
- US Stimulus Headlines
Continuing to drive the US Dollar this week will be ongoing discussions over the next fiscal stimulus package, with the ‘Greenback’ potentially reversing some of its recent losses amidst reports that the Democrats rejected a $1.8 trillion proposal.
GBP/USD Exchange Rate Outlook
The GBP/USD exchange rate will highly likely remain volatile this week as coronavirus, Brexit and US stimulus uncertainty dominate.