Pound to US Dollar Exchange Rate Hits 2 and a Half Month Best on Brexit Hopes
The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to advance when markets opened this week. Investors are buying the Pound (GBP) on a combination of Brexit, coronavirus and UK economic hopes.
Last week saw GBP/USD gradually climb from the level of 1.3193 to 1.3285 – a gain of almost a cent.
While last week’s advance was more gradual, GBP/USD has already jumped since markets opened this morning. At the time of writing, GBP/USD is trending near a high of 1.3377 – the best level for the pair since the beginning of September.
The Pound could be in for even more gains in the coming days, if there are optimistic Brexit developments this week.
Pound (GBP) Exchange Rates Jump on Combination of Factors
The Pound has been among the market’s most appealing major currencies this morning. It comes as the British currency jumps on Brexit and coronavirus hopes.
Markets predict the UK and EU are getting closer to reaching a Brexit deal. A UK company, AstraZeneca, also announced today that its coronavirus vaccine trials were going well.
On top of all this though, today’s UK PMI projections beat expectations. They indicated to markets that Britain’s economy may be weathering the second coronavirus lockdown better than initially expected.
US Dollar (USD) Exchange Rates Pressured by Vaccine Optimism
The US Dollar is a safe haven currency. It is often appealing in times of market uncertainty.
As a result though, it has been tumbling lately as markets become more hopeful that coronavirus vaccines are getting closer to reality.
In recent weeks, drugmakers have been announcing significant progress in vaccine trials. AstraZeneca’s announcement today is the most recent.
According to Robin Winkler and George Saravelos, FX Strategists at Deutsche Bank:
‘From a market perspective, the vaccine news cements our bullish view on most pro-cyclical currencies against the US Dollar through the turn of the year,’
GBP USD Exchange Rate Outlook May Strengthen Further
The Pound to US Dollar exchange rate may be able to hold much of its recent strength, even if no Brexit deal is reached this week as previously hoped.
Even if UK-EU Brexit negotiations continue to be drawn out, markets are becoming more confident that officials are determined to secure a deal rather than let talks collapse and end with a no-deal outcome.
As a result, the Pound could remain strong even if Brexit negotiations continue well into December before reaching a deal, or even if the Brexit transition period is somehow extended slightly into early 2021.
Tomorrow’s UK distributive trades data could be influential, but today’s stronger than expected PMIs are keeping the UK economic outlook a little less dire than feared too.
Essentially, investors may not have much reason to sell the Pound. This means that unless the US Dollar strengthens on market safe haven demand, GBP/USD is likely to sustain recent gains.
Tomorrow will see the publication of US manufacturing data from Richmond Fed, which could dent the Pound to US Dollar exchange rate’s strength if it impresses.
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