GBP USD Exchange Rate Struggles to Hold Best Levels amid Brexit Jitters
The Pound to US Dollar (GBP/USD) exchange rate has fallen from its best levels on Brexit uncertainty today. However, the pair remains high overall as global market confidence is rising, keeping pressure on safe havens like the US Dollar (USD).
Since opening this week at the level of 1.3285, GBP/USD has been trending with an upside bias. GBP/USD touched on a high of 1.3394 earlier in the week, but has been unable to hold near those levels.
Still, at the time of writing on Wednesday, GBP/USD continues to trend near the level of 1.3330, modestly above the week’s opening levels.
The Pound (GBP) is unappealing today, but there is still possibility for it to be supported by Brexit developments in the coming weeks.
Pound (GBP) Exchange Rates Struggling as Brexit Uncertainty Rears its Head
Earlier in the week, the Pound saw a jump in demand on expectations that the UK and EU were getting closer to reaching a deal on Brexit.
However, a lack of recent progress has caused uncertainty to creep back into market sentiment today. The Pound outlook still remains clouded by the possibility that negotiations could end with a no-deal outcome.
Brexit jitters combined with the UK government’s mixed approach to the coronavirus pandemic have made some analysts concerned over how difficult it could be for Britain’s economy to recover.
According to Derek Halpenny, Head of Research at MUFG:
‘Given the severity of the GDP contraction for the UK this year is also likely to be worse than other advanced countries, the way back for the UK is likely to be more difficult and longer,’
US Dollar (USD) Exchange Rate Outlook Softer as Markets Less Urgent to Hold Safe Havens
Global market sentiment has been improving considerably in recent weeks.
Not only are hopes for the impact of coronavirus vaccines rising, but investors are also hopeful that US politics could calm notably when the incoming Joe Biden administration comes into power.
This week, the Trump administration indicated it would cooperate with the Biden administration to ensure a smooth transition. This softened US political uncertainty.
As a result of this, markets are being driven to riskier assets that can lead to greater gains. This is causing the safe haven US Dollar to remain weak.
GBP USD Exchange Rate Awaits Brexit and Federal Reserve News
The Pound to US Dollar exchange rate may struggle for direction unless there are some more surprising economic or political developments.
If UK-EU Brexit negotiations see any positive developments for example, GBP/USD could trend nearer its best levels again.
On the other hand, GBP/USD could shed some its recent strength if Brexit jitters worsen.
The US Dollar will remain appealing if markets continue to become more optimistic about the global outlook.
USD investors will also be closely watching this evening’s Federal Reserve meeting minutes report.
If the bank is more dovish than expected on the US economy, this could also weigh on the US Dollar’s appeal.
As US markets will be closed to observe the Thanksgiving Holiday towards the end of the week, the Pound to US Dollar exchange rate outlook could be driven more by Brexit news.