Pound to US Dollar Exchange Rate Weaker amid Brexit and US Political Uncertainties
The Pound Sterling to US Dollar (GBP/USD) exchange rate has been falling since yesterday. Rising market demand for safe haven currencies is leading to a jump in US Dollar (USD) strength, and uncertainty over Brexit is preventing the Pound (GBP) from holding its ground.
After opening this week at the level of 1.3045, GBP/USD spent the early week trending in a relatively narrow region near these opening levels. However, since yesterday GBP/USD has been tumbling again.
At the time of writing, GBP/USD is trending near a low of 1.2865. This was the worst level for the pair since last week. GBP/USD has now lost all of last week’s gains as well, as it trends below last week’s opening levels of 1.2933.
If US political uncertainty softens again though, the Pound to US Dollar exchange rate could still strengthen again.
Pound (GBP) Exchange Rates Unappealing as Brexit Progress Seen as Insufficient
At the beginning of the week, the Pound (GBP) was fairly resilient amid hopes that UK-EU Brexit negotiations were still likely to see a deal of some kind over the coming month.
However, EU officials are reportedly still unsatisfied with the progress of talks.
According to a report from Reuters today, EU leaders will say at an upcoming summit that progress in talks is ‘still not sufficient’. They are also expected to tell UK negotiators to return to the initially agreed Brexit withdrawal agreement.
This led to losses in the Pound this morning, as markets remained concerned that Brexit talks could still collapse.
Still, optimism around an upcoming call between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen is preventing Sterling from seeing further losses.
US Dollar (USD) Exchange Rates Advancing as Panicked Markets Seek Safe Havens
The US Dollar (USD) is a safe haven currency, which often benefits in times of global market uncertainty. This has been the primary cause of the US Dollar’s advances this week so far.
At the beginning of the week, the US Dollar was boosted by concerns that US Congress would not be able to agree to new fiscal stimulus before the upcoming 2020 Presidential Election.
Not only have these concerns persisted and continued to support safe haven demand, but global coronavirus jitters are worsening as well.
According to Fiona Cincotta, Analyst at Gain Capital:
‘Whilst it is common to see pauses in vaccine trials, this boils down to the fact that at best it could take longer to get a vaccine rolled out and at worst the trials will be shelved. Either way you look at it, its not good news for risk sentiment in the markets.’
Pound to US Dollar (GBP/USD) Exchange Rate Awaits Brexit Developments
UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will have a phone meeting this afternoon.
For now, market focus will be on this upcoming call, as well as the EU Summit set for the end of the week. If officials continue to express concern with the lack of progress, the Pound (GBP) could be in for further losses towards the end of the week.
On the other hand though, if there are any surprising optimistic developments, the Pound is likely to advance.
Even if Sterling’s advances are limited, GBP/USD may be in for even stronger advances if safe haven demand weakens and the US Dollar (USD) sheds some ground.
If markets calm at all regarding US politics or global coronavirus fears, the Pound to US Dollar (GBP/USD) exchange rate is more likely to advance.