GBP/USD Exchange Rate Rises as UK-EU Brexit Talks Face ‘Crucial Moment’
The Pound to US Dollar (GBP/USD) exchange rate rose by 0.2% today, with the pairing currently trading around $1.34.
The Pound (GBP) rose today following news that the UK and EU are ‘optimistic’ about a post-Brexit trade deal being reached before Christmas.
Michel Barnier, the EU’s Chief Negotiator, commented:
‘We are really in a crucial moment and we are giving it a final push. In 10 days, the UK will leave the single market.’
A senior EU diplomat also said that most ‘issues are preliminarily closed or close to being agreed’, adding:
‘EU negotiators are in a last push now to make progress and to clinch a deal acceptable for both sides. The EU will not close its door to the UK and remains ready to negotiate even beyond 1 January.’
As a result, GBP investors are becoming more hopeful that the UK and EU could secure a Brexit deal ahead of Christmas or before January 1st, when Britain is officially scheduled to leave the EU.
US Dollar (USD) Steady as Safe-Haven Demand Increases as Covid-19 Cases Rise Worldwide
The US Dollar (USD) received a boost from souring risk sentiment today, with investors seeking out the safe-haven ‘Greenback’ as the global economic situation looks increasingly uncertain.
Additionally, demand for USD rose after US President Donald Trump attempted to veto the US stimulus bill, sparking concerns of further economic volatility into the new year.
Kyle Rodda, an analyst at IG, explains:
‘The developments stoked concern in the market that after months of bartering and dysfunction in Congress in getting a much needed package together, it may fall down at the final hurdle.’
In US economic news, today will see the release of November’s Durable Goods Orders.
Any signs of an improvement in America’s economy could limit demand for the ‘Greenback’ as the outlook for the global economy improves.
GBP/USD Outlook: Could Sterling Rise on a UK-EU Trade Deal Ahead of Christmas?
Pound (GBP) traders will be monitoring Brexit developments over the course of this week and next.
Any signs of a consensus on a trade deal being GBP-positive.
However, if talks between the UK and EU show signs of breaking down before Christmas, then we would see Sterling suffer on heightened fears of a no deal on January 1st.
The US Dollar (USD) could head higher this week, however, with demand for the safe-haven currency rising as Covid-19 infections increase throughout Europe.
As a result, the GBP/USD exchange rate could begin to fall as risk sentiment sours on growing concerns for the global economy.