Pound US Dollar (GBP/USD) Exchange Rate Sinks Slightly on US Thanksgiving Holiday

GBP/USD Comes Under Pressure on Brexit, Coronavirus Headwinds

(Updated 16:00, 25/11/2021) The Pound US Dollar (GBP/USD) exchange rate is subdued this afternoon as Sterling succumbs to downside amidst worries over UK-EU relations.

Despite reassurances from Prime Minister Boris Johnson, tensions ramped up again this afternoon as the French Fishing Association Body said it still does not have what it wants, and it will take retaliatory measures as soon as possible if demands are not met. 

French authorities accused the UK earlier this year of only issuing half the fishing licences that France is entitled to: Environment Secretary George Eustice responded that the UK has licensed 98% of EU vessels that applied for access to UK waters, almost half of which are French.

Annick Girardin, France’s minister of the sea, maintains that this is untrue, however, saying that only 90% (rather than 98%) of EU vessels who applied were granted UK licences, and that the ones unaccounted for are the French.

The Fishing Association Body said that its fishermen will be taking action on Friday at 2pm GMT at the port of Caen-Ouistreham, which may lead to the blockade of some boats. Protest action will also take place at St Malo and in the Eurotunnel. 

‘This is our demonstration of the quality and ability of professional fishermen to mobilise in response to the UK’s provocative, contemptuous and humiliating attitude towards them,’ says Gerard Romiti, President of National Maritime Fisheries Committee.

Original article continues below:

Pound US Dollar Exchange Rate Fluctuates Ahead of UK Distributive Trades

The Pound US Dollar (GBP/USD) exchange rate climbed overnight as investors took stock of yesterday’s US data. Releases were mixed, with the Core Personal Consumption Expenditures (PCE) Price Index reaching 4.1% as expected while durable goods orders fell by 0.5% in October.

At the time of writing, GBP/USD is trading at $1.3335, virtually unchanged from today’s opening levels.

Pound (GBP) Supported by Brexit Optimism, BoE Rate Hike Hopes

The Pound (GBP) is climbing against several of its peers this morning as Brexit tensions appear to be under control.

British policymakers have told Irish PM Michael Martin that they won’t trigger Article 16 unless talks collapse: meanwhile, European Affairs Minister Clement Beaune said on Wednesday that France will continue discussions with the UK over post-Brexit fishing access for a few days before any retaliatory measures will be taken.

A speech from Bank of England (BoE) Governor Andrew Bailey this afternoon will supply further trading impetus, as investors pay close attention for signs of an imminent change to monetary policy.

The latest improvement in UK jobs and inflation data, in addition to firmer preliminary PMI readings, may encourage Bailey to reiterate his former hawkish tone: however, forecasts of a New Year coronavirus surge could inspire dovish action.

Also applying downside is yesterday’s Tenreyro speech. Monetary Policy Committee (MPC) member Silvana Tenreyro said on Wednesday that she could not predict whether the BoE will hike rates in either December or January, as ‘the exact timing will depend on the data.’

US Dollar (USD) Trades Mixed as US Holiday Restricts Market Action

The US Dollar (USD) is trading in a mixed range today as the US 10-year Treasury dropped after refreshing monthly high the previous day.

Yesterday’s hawkish minutes from the Federal Open Market Committee (FOMC) cap downside, as some participants said a faster taper could be warranted: a speech from FOMC member Mary Daly iterated that if things continue to go as they have been going, she would support a tapering acceleration.

Also buoying the ‘Greenback’, yesterday’s data revealed that the US Personal Consumption Expenditures Price Index jumped to 5.0% YoY in October, surpassing expectations of 4.6% to reach a 30-year high. The measure was mainly boosted by costs of durable and nondurable goods.

Durable goods orders dropped below expectations, applying some pressure – but excluding transport, orders increased to meet market expectations. Jobs data also impressed, with 199K new people filing claims for unemployment benefits last week, as opposed to the 260K expected.

Pound US Dollar Exchange Rate Forecast: UK Data to Apply Upside?

Looking ahead, UK distributive trades data may lift the Pound US Dollar exchange rate later this morning – however, bearish trading amidst coronavirus concerns could limit Sterling appeal.

Conversely, the US Dollar may enjoy tailwinds if Covid fears renew bond yields, underpinning USD strength. The ‘Greenback’ is likely to benefit from its safe-haven status if virus woes proliferate.

Olivia Evershed

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