Concerns over whether or not a UK-EU Brexit deal will be made have not been enough to weigh on the GBP USD exchange rate. Investors are buying the Pound against the less appealing US Dollar, as investors continue to sell safe havens like the US Dollar in favour of riskier ones.
Last Week: Brexit Optimism Fades but US Dollar Continues to Weaken
At the beginning of last week, UK-EU Brexit deal optimism combined with US Dollar weakness saw GBP/USD jump higher.
After that point though, optimism that a Brexit deal was close softened. Speculation rose that talks could run out of time and a no-deal Brexit was still highly possible. This limited the Pound’s appeal.
However even as Brexit hopes softened, the US Dollar remained weaker than the Pound. The safe haven US Dollar has been sliding on hopes for a global recovery from the coronavirus pandemic next year, combined with underwhelming US data.
Three Things to Watch For This Week
- Brexit Negotiations
A new round of UK-EU Brexit talks is taking place this week, as December begins. If there is any progress in talks, hopes for a deal could rise, but no-deal Brexit fears could push the Pound lower instead.
2. UK and US PMIs
Britain’s November PMIs from Markit and US November PMIs from ISM will be published this week. They will give investors the clearest indication so far of how economies performed over the past month.
3. US Non-Farm Payrolls
Friday will see the publication of November’s US Non-Farm Payrolls report. This key reading of the US job market will illustrate how the US economy is faring against the coronavirus pandemic.
GBP/USD Outlook
The Pound could keep climbing against the US Dollar if optimism over Brexit negotiations persists, but rising no-deal Brexit fears or strong US ecostats could push the Pound to US Dollar exchange rate lower again.