GBP USD Exchange Rate Tumbles as Brexit and Coronavirus Uncertainties Persist
Investors are cautiously anticipating more developments from UK-EU Brexit negotiations, and the Pound Sterling to US Dollar (GBP USD) exchange rate is slipping today as a result. If there are any solid Brexit developments the pair could shoot in a different direction.
This week so far, GBP/USD has been attempting to recover, trending slightly higher. However, GBP/USD has been unable to return to last week’s opening levels of 1.3439.
Since opening this week at the level of 1.3227, GBP/USD trends with an upside bias. At the time of writing, GBP/USD trends in the region of 1.3286.
The safe haven US Dollar’s (USD) appeal remains limited as markets are more willing to take risks. The Pound (GBP) outlook could see a massive change on Brexit developments soon though.
Pound (GBP) Exchange Rates Knocked as Brexit Uncertainties Persist
Yesterday saw investors buying the Pound, amid news that UK-EU Brexit negotiations would be extended once again. It led to a limited rise in Brexit deal hopes.
Still, the longer passes without developments, the weaker the Pound outlook will become again. There is now just half a month until the end of the Brexit transition period.
Speculation that there had been progress on the issue of a level playing field was not enough to keep Sterling stronger today. Uncertainty over when Brexit developments would happen left Sterling a little weaker.
Today’s UK job market report was mixed which also weighed on Sterling. While key unemployment and wage stats beat forecasts, redundancies hit record highs due to the government’s unpredictable plans on its furlough scheme.
The coronavirus pandemic continues to sweep Britain as well, as London is put in Tier 3 restrictions.
US Dollar (USD) Exchange Rates Lack Drive amid US Stimulus Speculation
The US Dollar remains one of the less appealing major currencies this week.
Investors have been selling the safe haven US Dollar as market sentiment improves. Investors are more willing to take risks amid coronavirus vaccine hopes, and hopes for an economic rebound next year.
On top of this, speculation is rising that US Congress may be getting closer to passing a big fiscal policy package to protect the economy from the pandemic.
According to Yohay Elam, Analyst at FXStreet:
‘It is probably no coincidence that McConnell shifted from reluctance to push through a bill to urging action on the same day that the Electoral College formalized President-elect Joe Biden’s victory.’
Pound to US Dollar (GBP USD) Exchange Rate Could See Huge Shift on Brexit News
For Pound exchange rates, all eyes remain on UK-EU Brexit negotiations. There could be huge developments within days that make it clearer whether a Brexit deal will be made, or Britain will crash out of the EU with no deal.
According to Analysts at Deutsche Bank, a deal being reached could cause GBP/USD to shoot higher:
‘Our analysts think it could go even higher if there were a deal,
We continue to see a move to around 1.36 in Cable upon completion of a deal, up from the $1.3343 it’s currently trading at.’
For the US Dollar though, it may be in for further losses if US Congress does agree fiscal stimulus, or if the Federal Reserve takes a more dovish stance on monetary policy tomorrow.
Overall, political and policy developments will be driving the Pound to US Dollar (GBP USD) exchange rate this week.