After a week of fears that Brexit negotiations could be over for good, the Pound to US Dollar (GBP/USD) exchange rate is bouncing on fresh Brexit hopes today. Brexit talks have been extended once more, and markets are fairly optimistic a deal will be reached.
Expectations for the Federal Reserve to become more dovish on US monetary policy to protect the economy from the impact of the coronavirus pandemic are keeping the US Dollar weak.
Last Week: Pound Plunges as Brexit Hopes Dwindled
With time running out until the end of the Brexit transition period, last week saw speculation rise that Brexit negotiations had failed.
The UK and EU were unable to reach an agreement on Brexit before the self-imposed deadlines set last week. It led to a surge of no-deal Brexit fears, and the Pound tumbled towards the end of the week.
The US Dollar remained unappealing throughout the week. Coronavirus vaccine developments dampened safe haven appeal, and US coronavirus infections worsened US economic woes.
Three Things to Watch For This Week
- Brexit Negotiations
Could UK-EU Brexit negotiations finally see progress this week? Some analysts don’t expect much progress until the real deadline at the end of the month approaches, but the process will remain the closest watched issue for Pound investors.
2. Central Bank Policy Decisions
The Federal Reserve will hold its December policy decision on Wednesday, and the Bank of England’s (BoE) will follow on Thursday. If the banks take a shift in tone on the coronavirus pandemic, this could impact currency trade.
3. Slews of Data
Key UK and US data will be published throughout the week. UK unemployment and inflation data will be published in the first half of the week, and US and UK retail stats later in the week could be particularly influential.
In a week of central bank news and key data, Brexit developments may still overshadow. Either way, there is plenty for Pound to US Dollar exchange rate investors to react to in the coming sessions.