GBP/USD Exchange Rate Rangebound as Safe-Haven Demand for USD Creeps Higher
The Pound to US Dollar (GBP/USD) exchange rate is rangebound this morning, with the pairing currently trading around $1.2901.
The US Dollar (USD) received a boost today after US President Donald Trump unexpectedly announced that he would end negotiations with the Democrats over a coronavirus relief and stimulus package.
Asmara Jamaleh, an Economist at Intesa Sanpaolo, commented:
‘Trump has ordered negotiations with the Democrats on a new fiscal stimulus package to be put on hold until after the elections. While the immediate impact reaction of the Dollar has been positive, due to the prevalence of its safe haven status, the effect could reverse subsequently and transform into a weakening.’
In other US economic news, today will see the release of The Federal Open Market Committee (FOMC) minutes.
If the world’s largest economy is downbeat in its economic forecasts, then risk-sentiment would drop, boosting the safe-haven ‘Greenback’.
Today will also see a speech from John C Williams, the President of the Federal Reserve Bank of New York.
Again, any dovishness about the US economy could further benefit the US Dollar.
Pound (GBP) Steady as EU Harden Stance of Fisheries
The Pound (GBP) struggled against the US Dollar (USD) today following news that the European Union (EU) had hardened its stance on fisheries, sparking concerns of a hard-Brexit later this year.
Analysts at Bloomberg reported:
‘Paris’s stance on fish is becoming a second major focus of concern. [French President Emmanuel] Macron designed the EU’s hard-line opening position – that Britain should be forced to hand over just as much fish as it did when an EU member – and so far hasn’t budged.’
In UK economic data, today’s release of September’s Halifax House Prices pointed to a marked improvement, with the figure rising by 1.6% month-on-month.
Russell Galley, managing director at Halifax, commented on the data:
‘There has been a fundamental shift in demand from buyers brought about by the structural effects of increased home working and a desire for more space. [T]he stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March.’
Nonetheless, with the UK economy set for Brexit and months of Covid-19, GBP investors have remained cautious.
GBP/USD Outlook: Could the EU’s Hardening Brexit Stance Drag Down Sterling?
Pound (GBP) investors will be looking ahead to tomorrow’s speech from the Bank of England’s Governor Andrew Bailey. Any dovishness from the Bank would prove GBP-negative.
US Dollar (USD) investors will be keeping an eye on tomorrow’s latest US Initial Jobless Claims. If American unemployment continues to drop, we could see the ‘Greenback’ benefit.
The US Dollar (USD) will however remain sensitive to global risk sentiment. As a result, any signs of increasing Covid-19 cases worldwide would bolster safe-haven demand for USD.
The GBP/USD exchange rate would quickly sink if UK-EU trade talks fail to progress toward a post-Brexit trade agreement.