GBP USD Exchange Rate Jittery but Brexit Deal Still Expected
The Pound to US Dollar (GBP/USD) exchange rate has fallen back from its best levels this morning, but is avoiding big losses. Hopes for a Brexit deal to be reached soon are keeping the Pound (GBP) buoyed.
Since opening this week at the interbank level of 1.31, GBP/USD has been trending with an upside bias. GBP/USD continued to trend higher until the middle of the week, when it touched on a high of 1.33. This was the best level for GBP/USD in over two and a half months.
GBP/USD has since slipped from those highs. However, the pair has sustained most of this week’s gains and is trending in the interbank region of 1.32 at the time of writing.
Brexit and coronavirus developments are likely to remain the focus for both the Pound and US Dollar (USD) in the coming sessions as well.
Pound (GBP) Exchange Rates Supported as Markets Still Hopeful on Brexit Deal
The UK and EU have not presented a Brexit deal this week as originally hoped. However, the Pound continues to benefit from hopes that a Brexit deal is imminent.
Officials continue to show an optimistic tone on negotiations. Markets are also betting that a deal could be shown early next week.
These hopes are keeping Brexit deal hopes higher than no-deal Brexit fears. Markets remain optimistic today amid signals that negotiation are ploughing ahead.
Barnier has cancelled briefings to EU side – planned for Tues night and then Weds lunchtime – only a hint, but perhaps a good sign that negotiators are churning through the obstacles to a deal, working not briefing!
— Laura Kuenssberg (@bbclaurak) November 19, 2020
Today’s UK industrial trends orders data from the Confederation of British Industry (CBI) was a little worse than forecast. The data ultimately had little impact on the Pound however.
US Dollar (USD) Exchange Rates Firm as Coronavirus Cases Surge
The US Dollar is a safe haven currency. It often benefits in times of global market uncertainty.
As a result, it has been stronger market fears rise over the global impact of the coronavirus pandemic. The pandemic is seeing infection surges in major economies that are expected to last through the key winter period.
However, its gains have been limited by hopes that coronavirus vaccines could lead to strong economic rebounds in 2021.
Analysts point out that uncertainty is keeping safer currencies appealing, but appeal remains limited:
‘It seems that market participants are confused. They don’t know where to place more emphasis, on the positive vaccine headlines or on the acceleration of the infections from the pandemic,
… any declines in risk-linked assets are likely to stay limited.’
GBP USD Exchange Rate Could Remain Near Best Levels
While the Pound to US Dollar exchange rate is struggling to hold its best levels, it is still trending strongly overall. What’s more, the Pound is likely to hold its ground so long as Brexit hopes persist.
If UK and EU officials remain optimistic about a Brexit deal, Sterling will remain buoyant. If a Brexit deal is presented next week as markets speculate, much of the downside risk in the Pound outlook could soften.
However, if negotiations falter it could lead to a rise in no-deal Brexit bets, which could be cause for huge Pound losses.
Brexit developments are likely to be the biggest focus for Pound movement. It is likely to overshadow tomorrow’s UK retail sales data, though strong retail stats could boost the Pound’s appeal a little.
The US Dollar could remain appealing as well though, if upcoming ecostats show that major economies will struggle with the coronavirus pandemic through the end of the year.
Overall, Brexit and coronavirus de velopments will continue to be the primary causes of Pound to US Dollar exchange rate movement in the coming sessions.