GBP USD Exchange Rate Plummeting despite Mixed US Dollar Demand
While the safe haven US Dollar (USD) sees mixed demand on coronavirus vaccine developments, the Pound to US Dollar (GBP USD) exchange rate is plummeting today. The Pound (GBP) was hit by fresh anxiety that a no-deal Brexit is possible.
Last week saw GBP/USD climb from the interbank level of 1.33 to close the week at the level of 1.34. What’s more, GBP/USD touched on a high of 1.35 towards the end of the week, which was the best level for the pair in two and a half years, since early 2018.
Since markets opened this morning though, GBP/USD has been falling again. At the time of writing, GBP/USD had essentially shed last week’s gains and was trending in the interbank region of 1.32.
Brexit and coronavirus developments remain the biggest focuses for Pound and US Dollar investors.
Pound (GBP) Exchange Rates Plummet as Risk of No-Deal Brexit Worsens
The Pound’s volatility has intensified since markets opened this morning, and the British currency has plummeted.
The Brexit transition period is set to end at the end of this month, and recent negotiations have reportedly not led to any big development.
Reportedly, EU Chief Brexit Negotiator Michel Barnier was ‘downbeat’ about negotiations in a briefing today. This worsened concerns that a deal may not be reached in time, leading to a worst-case scenario no-deal Brexit.
There have also been comments suggesting that if there is no further progress then talks could end as soon as today.
US Dollar (USD) Exchange Rates Struggle as Coronavirus Continues to Hit the US
The coronavirus pandemic continues to hit the US economy hard. Last week’s US Non-Farm Payroll data was concerning and data has overall shown that the US economy is running out of steam.
According to Lee Hardman, Currency Analyst at MUFG:
‘The recent loss of momentum is a concern as it suggests that it will take longer to reverse the negative hit to the US labour market from the COVID shock, given renewed disruption from the third wave,’
On top of US data concerns, the US Dollar is tumbling as investors sell safe haven currencies. Global hopes for coronavirus vaccine developments keep making investors more willing to take risks.
Pound to US Dollar (GBP USD) Exchange Rate Sensitive to Fate of Brexit Talks
The fate of UK-EU Brexit negotiations, a process which has been going on in some form for over four years, hangs in the balance this month.
If the UK and EU fail to find any breakthroughs in talks any time soon, no-deal Brexit fears are only likely to worsen. The rising possibility of a no-deal Brexit could mean more and more losses for the Pound.
On the other hand, if there is a breakthrough and a deal is seen as likely, the Pound could quickly recover this morning’s losses and GBP/USD could trend closer to its best levels again.
As for the US Dollar, it will continue to be driven by shifts in market sentiment. If global coronavirus hopes continue to improve, the safe haven US Dollar will likely see further losses.
This week’s UK and US data will be less influential. As a result, Brexit and coronavirus vaccine developments will continue to influence the Pound to US Dollar (GBP USD) exchange rate.