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Fortnight Low for Pound to US Dollar Exchange Rate as No-Deal Brexit Fears Cloud Outlook

Pound to US Dollar Exchange Rate Slumps on UK Government’s Brexit Threat

Following last week’s losses, the Pound Sterling to US Dollar (GBP/USD) exchange rate is falling further this week. The US Dollar (USD) is benefitting from a selloff in the Pound (GBP), amid the latest Brexit developments.

After opening last week at the level of 1.3351, GBP/USD briefly jumped higher.

GBP/USD touched on a 2020 high of 1.3473, before tumbling towards the end of the week and closing at the level of 1.3278.

GBP/USD has only fallen further this week, shedding a cent and much of the pair’s impressive August gains. At the time of writing, GBP/USD trends just above a fortnight low of 1.3128.

Much of this week will be relatively quiet for data. This could leave the Pound to US Dollar exchange rate driven more by Brexit and coronavirus developments in the coming sessions.

Pound (GBP) Exchange Rates Throttled by Revived No-Deal Brexit Fears

After weeks of strong performance on hopes that Britain’s coronavirus situation was better than the US situation, Brexit concerns have finally returned to focus for Sterling.

Market fears that 2020 would end with a no-deal Brexit had been bubbling away in the background in recent months. However, the fears but had been overshadowed by the global market focus on the coronavirus pandemic.

This week though, fresh reports that the UK government was planning to throw a spanner into negotiations by altering withdrawal agreement legislation has led to a Pound selloff.

Since the news emerged, economists and businesses have been warning the UK government that heading for a no-deal Brexit would be dire for Britain’s economy.

According to Josh Hardie, Deputy Director General at the Confederation of British Industry (CBI):

‘Amid all the noise and negotiations, businesses in the UK and EU remain clear – a good deal is essential. An agreement will be the foundation for post-Covid recovery across the continent,

Getting a deal requires political leadership and compromise from both sides. That is needed urgently in the coming weeks.’

US Dollar (USD) Exchange Rates Steady amid Lack of Fresh Developments

Investors have had little reason to shift direction on the US Dollar this week.

The US currency saw a rise in demand last week, as it benefitted from profit-taking and losses in its rival the Euro (EUR).

While US Non-Farm Payroll data published at the end of last week was fairly disappointing, the US Dollar continued to climb this week so far.

The US Dollar is still edging higher as it takes advantage of rival weakness. On top of the Pound’s weakness, the US Dollar is also gaining on weakness in the Euro. The shared currency is weaker as markets expect a more dovish European Central Bank (ECB) on Thursday.

Pound to US Dollar (GBP/USD) Exchange Rates Await Brexit and ECB Developments

The Pound to US Dollar exchange rate may have even further to fall, if Brexit uncertainties keep worsening.

Markets are highly anxious about the direction the UK government will head next, whether it will U-turn on its threats over the withdrawal agreement or continue to threaten a no-deal Brexit.

Brexit negotiations and the possibility of a no-deal Brexit are expected to become an increasingly large focus for the Pound towards the end of the year.

What’s more, the Pound could come under even deeper pressure if Britain’s coronavirus situation worsens as well.

Meanwhile, the US Dollar is likely to be influenced by rival movement amid a lack of major US data due for publication this week.

According to Kim Mundy, Currency Analyst at Commonwealth Bank of Australia:

‘In our view, the Dollar can lift further over the remainder of the week because of the possibility the ECB takes a sharper dovish turn.’

Overall, the Pound to US Dollar (GBP/USD) exchange rate could easily be in for further losses this week.