Pound to US Dollar Exchange Rate Climbs to Best Levels since September
Investors are buying the Pound US Dollar (GBP/USD) exchange rate today, amid hopes that the UK and EU are getting closer to a deal on Brexit. The Pound (GBP) is benefitting from this news, while the US Dollar (USD) is being weighed by rival strength.
Since markets opened this week, GBP/USD has been trending with an upside bias. GBP/USD opened this week at the interbank level of 1.31 and has already gained around a cent.
This morning, GBP/USD touched on a high of 1.32. This was the best level for GBP/USD since the beginning of September, about two and a half months ago.
GBP/USD continues to trend near those highs at the time of writing. Brexit speculation is currently the biggest focus for the Pound outlook.
Pound (GBP) Exchange Rates Gaining on Hopes for Brexit Deal
Despite rising market fears that the global economy is in for a rough winter period, the Pound is climbing this week.
Investors are buying the Pound amid speculation that the UK and EU are closing in on a Brexit deal. Hopes are rising that a deal will be agreed before the end of the Brexit transition period this year.
Hopes have only risen amid recent optimism from officials, combined with the exit of Brexiteer Dominic Cummings from the UK government.
According to Charalambos Pissouros, Senior Market Analyst at JFD Group:
‘In case we get more optimistic headlines regarding a deal, and conditional upon risk-on returning into the markets, the Pound is likely to perform better against the safe havens, the likes of the US Dollar, the Japanese Yen, and the Swiss Franc,’
US Dollar (USD) Exchange Rates Slide Against Rivals amid US Coronavirus Concerns
While the US Dollar is a safe haven currency, it has been unable to benefit much from market uncertainty today.
Instead, the US Dollar is under fresh pressure amid concerns that the coronavirus pandemic will continue to hit the US economy hard over a tough winter period.
Disappointing US retail data yesterday only caused further concern about how the US economy would weather the coronavirus pandemic. According to Jeffrey Halley, Analyst at OANDA:
‘The US Dollar drifted lower overnight following disappointing US Retail Sales and with increasing concerns about the downstream effects of the resurgent Covid-19 pandemic’
Pound to US Dollar (GBP/USD) Exchange Rate Could Slump if Brexit Hopes Fade
Hopes that the UK and EU will agree to a Brexit deal soon are keeping the Pound higher. However, if there are no Brexit developments after all, or UK-EU relations worsen, the Pound outlook could see a sharp reversal.
Markets will continue to closely watch Brexit developments in the coming sessions. If no-deal Brexit fears return, the Pound is likely to slump and shed much of its recent gains.
Sterling is only likely to keep climbing if markets remain optimistic about Brexit. Of course, optimistic comments from UK and EU officials will help here too.
The US Dollar may remain jittery, as it is pushed higher by safe haven demand but weakened by concerns over the US economy being hit by the coronavirus pandemic.
Towards the end of the week, the Pound may find some additional support if Friday’s UK retail sales results impress investors.
Of course, poor UK data could bring Britain’s own coronavirus fears back into focus instead. This could put pressure on the Pound US Dollar exchange rate.