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Near 2 and a Half Month Best as Pound to US Dollar Exchange Rate Outlook Benefits from Brexit Hopes

Pound to US Dollar Exchange Rate Sustain Gains Thanks to USD Weakness 

The Pound Sterling to US Dollar (GBP/USD) exchange rate is on track to sustain gains this week. Brexit hopes are keeping Sterling (GBP) buoyant, while the US Dollar (USD) outlook is dented by US stimulus hopes. 

GBP/USD has continued to advance higher and higher in recent weeks. After opening at the level of 1.3193, this week’s advance has been more solid than last week’s. 

At the time of writing on Friday, GBP/USD trends around the level of 1.3281 – almost a cent higher. GBP/USD is close to yesterday’s high of 1.3306, which was the best level for the pair in two and a half months. 

Next week’s Brexit developments may be key for the Pound to US Dollar exchange rate outlook. Many downside risks remain for the pair, especially if Brexit negotiations hit new roadblocks. 

Brexit-Boosted Pound (GBP) Exchange Rates Supported Further by Retail Stats 

For most of the past week, investors have been buying the Pound due to hopes that the UK and EU are closing in on some kind of Brexit deal. 

UK and EU officials continue to show optimism over negotiations. Speculation that a deal could be reached next week persists. 

Today though, the Pound found a little extra support in the form of much stronger than expected retail sales results. While Britain has returned to lockdown, October’s strong retail data has boosted hopes for resilience in economic activity. 

According to Economists at MUFG: 

‘UK retail sales jumped 1.2% MoM in data for October and once again we have evidence of the resilience of consumer spending when an economy faces restrictions related to COVID-19.’ 

US Dollar (USD) Exchange Rates Avoid Further Losses amid US Economic Uncertainty 

Concerns over how the US economy will handle the coronavirus pandemic in the coming months have led to mixed US Dollar movement in recent sessions. 

The US Dollar is a safe haven currency, which often benefits in times of uncertainty. Because of this, it has actually been weakened by hopes of more fiscal stimulus from US Congress, but strengthened by Federal Reserve concerns. 

US Treasury Secretary Steven Mnuchin called an end to some of the Fed’s quantitative easing (QE) lending, causing concerns about stopping programs that had helped protect the US economy during the pandemic. 

The uncertainty this move caused boosted safe haven demand slightly, but overall the US Dollar was unable to claw back much ground against a strong Pound. 

Pound to US Dollar (GBP/USD) Exchange Rate Outlook Depends on Brexit Developments 

The Pound to US Dollar could plummet next week, but it could also continue on its cautiously bullish trajectory. It all depends on how the Brexit process develops. 

If the UK and EU agree to a Brexit deal early next week, as speculated, the Pound outlook is likely to improve. Much of the downside risk in the Pound would soften as well. 

But if Brexit relations worsen, the Pound could slump and no-deal Brexit fears could return to the Pound outlook. This could mean GBP/USD loses much of its recent gains. 

The focus for the US Dollar, on the other hand, will be the US coronavirus situation. 

If the pandemic’s impact on the US continues to worsen, safe haven demand could rise and the US Dollar could benefit from this. 

Key UK and US PMI projection data due next week could also influence the Pound to US Dollar exchange rate outlook if it surprises investors.