GBP/USD Exchange Rate Rises on Brexit Deal Confidence
The Pound to US Dollar (GBP/USD) exchange rate rose by 0.5% today, with the pairing currently trading around $1.351.
Sterling headed higher today following encouraging comments from Ursula von der Leyen, the European Commission’s President, who said that a ‘path to agreement’ on Brexit talk now exists.
Nonetheless, Von der Leyen added that complications over UK-EU fishing rights could sink a post-Brexit trade agreement between the two sides.
Von der Leyen added:
‘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.’
GBP traders, however, have welcomed news of progress in talks between the UK and EU, seeing it as increasing the odds of a trade deal before January 1st.
In UK economic news, today saw the release of the flash UK Services PMI for December, which fell below forecasts at 49.9.
Chris Williamson, the Chief Business Economist a IHS Markit, said that the UK had, however, showed a ‘return to growth in December’.
‘Business optimism about the year ahead also remained buoyant, reflecting the light at the end of the tunnel created by the roll-out of the COVID-19 vaccines. Optimism waned slightly compared to November, however, largely due to rising concerns over a no-deal Brexit.’
US Dollar (USD) Falls on Rising Covid-19 Vaccine Optimism
The US Dollar (USD) remains subdued on Covid-19 vaccine optimism, with the Food and Drug Administration (FDA) agreeing upon the effectiveness of the Moderna vaccine.
As a result, this has put America one step further to a rollout of a coronavirus vaccine, dampening the demand for the safe-haven ‘Greenback’.
Ron Klain, President-elect Joe Biden’s chief of staff, however, warned:
‘We’re still in the middle of what will be a very, very, very dark winter. There are probably tens of thousands of deaths left before the end of the year and more deaths after that.’
USD investors will be awaiting today’s announcement of the US Federal Reserve’s Interest Rate Decision, which is expected to remain at 0.25%.
Any dovish comments about America’s economy – which is the largest in the world – could renewed demand for safe-haven currencies like the US Dollar.
Conversely, if the Fed is optimistic about the Covid-19 vaccine rollout across the United States, we could see risk sentiment improve and drag down the USD/GBP exchange rate
GBP/USD Forecast: Could More Positive Brexit Trade Deal News Boost Sterling?
US Dollar (USD) traders will be awaiting tomorrow’s release of December’s Initial Jobless Claims data.
Any signs of increasing unemployment in America could weigh on the ‘Greenback’.
However, further news of a possible US Covid-19 vaccine rollout this year would clip demand for the safe-haven USD.
Pound (GBP) investors will be eyeing tomorrow’s release of the Bank of England’s Interest Rate Decision. GBP would suffer from any dovish commentary about the British economy.
Brexit will continue to direct the GBP/USD exchange rate this week, however, with any further signs of a possible trade deal between the UK and EU being GBP-positive.