GBP/USD Exchange Rate Clings to Gains Following US Data
(Updated: 16:30, 28/02/23) The Pound US Dollar exchange rate trades with robust daily gains this afternoon.
At the time of writing GBP/USD holds above $1.21, trading over half a cent higher than this morning’s opening levels.
The pairing’s continued strength is aided by the release of the latest US consumer confidence index, after a surprise deterioration in confidence limited the appeal of the US Dollar.
Meanwhile the Pound continues to be underpinned by optimism over the new ‘Windsor Framework’. GBP investors remain confident the new agreement regarding post-Brexit trade arrangements for Northern Ireland will remove a key strain on UK-EU relations.
🧵 The original Northern Ireland Protocol has been replaced and the new Windsor Framework has been announced.
Here is what has changed 👇
The Green Lane
❌ Before: Lengthy paperwork
✅ Now: Simple digital declarationWe’ve removed any sense of a border in the Irish Sea. pic.twitter.com/ZeQutYSlkt
— UK Prime Minister (@10DowningStreet) February 28, 2023
Original article continues below:
Pound US Dollar Exchange Rate Buoyed by NI Protocol Agreement
The Pound US Dollar (GBP/USD) exchange rate is on the front foot this morning. Continued optimism regarding a new Brexit deal is helping to underpin Sterling sentiment.
At the time of writing the GBP/USD exchange rate is trading at around $1.2106. Up almost 0.4% from this morning’s opening levels.
Pound (GBP) Extends Gains as Markets Pin Hopes on New Windsor Framework
The Pound (GBP) continues to catch bids this morning, amid relief over a new deal to resolve the dispute over the Northern Ireland protocol.
The new agreement between the UK and EU is dubbed the ‘Windsor Framework’. Its announcement in a joint press conference between Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen, propelled the Pound US Dollar exchange rate up by around a cent on Monday.
Sterling has so far maintained this momentum today. GBP/USD has climbed above $1.21 as investors hope the deal will help ease tensions between the UK and EU. Paving the way for a closer trade relationship between the two sides in the future.
However, the upside in the Pound is capped by concerns the Windsor Framework could face some resistance when it is put before the House of Commons.
Reports suggest ex-PM Boris Johnson might be plotting a rebellion against the new deal. Johnson is said to have told the Democratic Unionist party (DUP) to be careful in considering the agreement.
While the deal is likely to clear the Commons assuming the support of Labour, GBP investors fear a sizable Conservative rebellion could undermine Sunak’s position as PM. The resulting political uncertainty could infuse fresh volatility into the Pound.
US Dollar (USD) Supported by Cautious Market Mood
The US Dollar’s (USD) losses against the Pound have been tempered so far today by a prevailing risk-off mood.
Cautious investors continue to favour the safe-haven US Dollar amid heightened geopolitical uncertainty. Markets remain anxious over Russia’s next moves in Ukraine as well as a rise in US-China tensions as Washington warns Beijing against providing lethal aid to Russia.
The downside potential of USD exchange rates also looks to be suppressed by Federal Reserve interest rate expectations. Recent data has convinced USD investors US interest rates will be higher than initially thought this year.
Pound US Dollar Exchange Rate Forecast: BoE Bailey Speech to Lend Addition Support to Sterling?
Acting as a key catalyst for movement in the Pound US Dollar exchange rate on Wednesday will be a speech from Bank of England Governor Andrew Bailey.
The GBP/USD exchange rate may maintain a positive trajectory depending on how hawkish Bailey comes across. If he indicates more action needs to be taken to bring inflation back within the BoE’s target range then the Pound could strengthen.
Conversely if Bailey voices concerns over growth this may sap BoE interest rate hike expectations and weigh on Sterling.
The publication of the latest ISM manufacturing PMI is likely to be the focus for USD investors tomorrow.
The US Dollar could fall if February’s figures report another contraction in the US factory sector.