GBP/USD Exchange Rate Edges Higher as UK Brexit Deal Passes into Law
The Pound to US Dollar (GBP/USD) exchange rate rose by 0.3% today, with the pairing currently fluctuating around $1.36.
The Pound hit a 31-month high against the ‘Greenback’ today after UK Prime Minister Boris Johnson’s UK-EU Brexit deal successfully passed into UK law.
As a result, UK markets have become more optimistic about the British economy going into 2021.
Sterling has also benefited from the approval of the Oxford/AstraZeneca Covid-19 vaccine rollout, which is due to take place in January.
Jeffrey Halley, the senior market analyst at OANDA, explains:
‘The Astra Zeneca vaccine is a potential game-changing accelerator in the Covid-19 battle, being producible rapidly in massive amounts, and storable at room temperatures, instead of environments that mimic the South Pole in the middle of winter.’
With the new Covid-19 vaccine expected to be rolled out next month, GBP investors are now more optimistic about the UK’s economic recovery in the year ahead.
US Dollar (USD) Sinks as Demand for Safe-Haven Currencies Eases on US Stimulus Hopes
The US Dollar (USD) struggled today as risk-on market mood has clipped demand for the safe-haven ‘Greenback’.
Risk sentiment has improved as optimism over a US fiscal stimulus package has boosted confidence in America, the world’s largest economy.
Yesterday also saw the latest Chicago PMI tick higher at 59.5 in November.
Michele Maatouk, an analyst at Sharecast News, commented:
‘Among the main five indicators, employment saw the largest monthly gain, rising to a one-year high but remaining in contraction territory since July 2019. Order backlogs also gained, while new orders suffered the biggest decline.
‘Through the fourth quarter as a whole, business sentiment recovered further to 59.6, hitting its best level since the final quarter of 2018.’
In US economic news, today will see the release of December’s Initial Jobless Claims, which are expected to rise to 833 thousand.
Any signs of improvement in the US economy, however, could further drag down demand for the safe-haven ‘Greenback’.
GBP/USD Forecast: Could the ‘Greenback’ Continue to Sink as Risk Sentiment Improves?
UK and US markets will remain relatively quiet over the next few days as markets close for New Year’s Day.
However, we could see Sterling head higher as the new Covid-19 vaccine rollout draws nearer in January.
With the outlook for the British economy improving, we could see the GBP/USD exchange rate maintain its upward momentum.