GBP USD Exchange Rate Hits Best 2020 Levels on EU Officials Optimism
Optimism from EU officials that a Brexit deal can be reached helped the Pound Sterling to US Dollar (GBP USD) exchange rate climb higher today. The US Dollar (USD) remains weaker than most other major currencies, making gains easier.
Since GBP/USD opened this week at the interbank level of 1.32, the pair has rebounded. GBP/USD recovered all of last week’s losses as of Wednesday and is currently trending even higher.
At the time of writing, GBP/USD is trending near the level of 1.35. This is its best levels in two and a half years, since mid-2018.
Sterling (GBP) is climbing on Brexit hopes, but the British currency could plummet again if no deal is reached soon.
Pound (GBP) Exchange Rates Extend Rebound on Brexit Deal Hopes
The Pound is recovering last week’s losses and climbing higher this week. Today, speculation that a Brexit deal could be close is causing a jump in Sterling demand.
EU officials, including European Commission President Ursula von der Leyen, have taken optimistic stances on Brexit talks. She said today that a path to a deal could be seen.
Speaking at European Parliament, she said:
‘We have found a way forward on most issues but two issues still remain outstanding: the level playing field and fisheries. I am glad to report that issues linked to governance now have largely been resolved. The next days are going to be decisive.’
UK source, responding to @vonderleyen: "We've made some progress but we are still very far apart in key areas"
— Adam Parsons (@adamparsons) December 16, 2020
Today’s UK inflation and PMI data was largely overshadowed by Brexit speculation.
US Dollar (USD) Exchange Rates Unappealing as Markets Await US Fiscal Stimulus
After months of uncertainty, US Congress may finally be close to reaching a deal on a big fiscal stimulus package to protect the US economy from the impact of the coronavirus pandemic.
As the US Dollar is a safe haven currency, it is less appealing as market sentiment improves. Investors are looking to take more risks amid hopes for recovery from the coronavirus pandemic.
The US Dollar’s movement has been steadier, but it remains unappealing overall amid this speculation. According to John Doyle, Vice President of Dealing and Trading at Tempus Inc:
‘Today we’ve been just kind of sitting back and waiting, on the dollar side, for news from Capitol Hill,
That’s how the day started and I don’t see any huge moves that would have changed the outlook for that yet.’
Pound US Dollar (GBP USD) Exchange Rate Awaits Outcome of Brexit Talks
Today, markets appear increasingly geared up for a climactic period of UK-EU Brexit negotiations. Speculation is rising once again that a deal could be agreed within the week.
Similarly, markets are betting that US Congress could reach its own deal soon, on fiscal stimulus.
Negotiators in both Brexit talks and US stimulus talks seemingly want a deal more than no deal. For now, investors are optimistic.
However, if UK-EU Brexit talks suddenly collapse or time runs out without enough progress being made, the Pound could slump.
GBP/USD may also fall away from its highs if US stimulus talks fail, as this would boost safe haven demand and the US Dollar.
Tomorrow will also see the Bank of England (BoE) hold its December policy decision. The GBP USD exchange rate will remain focused on Brexit and US fiscal policy news however.