GBP/USD Exchange Rate Continues Advances despite UK Brexit Uncertainties
The Pound (GBP) continued to sustain gains against the US Dollar (USD), with the GBP/USD exchange rate hitting new multi-year highs this morning. This is despite looming uncertainty over Brexit’s impact over Britain’s economy and trade.
Strong movement in both currencies has led to wide volatility and fluctuations in GBP/USD lately. Last week saw GBP/USD slump from the opening level of 1.3705 and briefly touch on a half-month-low of 1.3572 before rebounding.
GBP/USD ultimately closed last week higher at the level of 1.3725 and has been pushing even higher this week. This morning, GBP/USD is jumping again an currently trends close to a high of 1.3786.
This is the best level GBP/USD has seen in over two and a half years, since April 2018.
Pound (GBP) Exchange Rates Remain Appealing on Market Sentiment despite Brexit Jitters
Over the past few weeks, the Pound has been broadly appealing as investors buy the currency on optimism over Britain’s coronavirus recovery outlook.
Britain’s lead in coronavirus vaccinations continues to keep the British currency appealing. This is helping the Pound to keep sustaining more gains over the more volatile US Dollar.
This is despite concerns over the effectiveness of vaccines on new coronavirus strains, as well as fresh Brexit tensions between the UK and EU.
As Northern Ireland trade is impacted by post-Brexit rules, analysts believe UK trade with the rest of the EU will be hurt this year as well. According to DIHK in Germany:
‘60% of German companies consider their current business situation in Britain to be bad and 57% expect further deterioration this year.
Customs bureaucracy, logistics problems, legal uncertainties and an increase in tariffs are the main challenges German businesses face after Brexit.’
US Dollar (USD) Exchange Rates Slide as Currency’s Rebound Rally Softens
The US Dollar has seen strong movement in recent weeks. It has been gaining on hopes for a big US fiscal stimulus package from the new Joe Biden administration, as well as hopes for the improving coronavirus situation in the US.
The US vaccination rollout is improving and this is boosting US Dollar appeal. However, market optimism over the potential stimulus package is becoming more mixed and this is dousing the US Dollar’s chances of further gains.
According to Strategists at Commerzbank:
‘The view on the effects the package will have on the US economy differ,
Whereas until recently the prospect of fiscal support caused positive reactions on the markets, the market no longer seems to be entirely certain about that any longer.’
Pound to US Dollar (GBP/USD) Exchange Rate Awaits More Coronavirus Developments
The Pound remains appealing on Britain’s coronavirus vaccine rollout, but could this optimism soften soon? Reports that some vaccines are not as effective as hoped against newer strains of the coronavirus could weigh heavier on the Pound.
What’s more, the US Dollar’s appeal could strengthen again soon if the US coronavirus vaccine rollout continues to improve.
For now, the US Dollar’s appeal is limited by market sentiment and concerns about the US economy. However, stronger than expected US data could help the US Dollar to strengthen again.
This afternoon, US job openings data from JOLTs will be published. If it beats forecasts it could boost US job market hopes following mixed Non-Farm Payrolls data last week.
Wednesday’s session will follow with key US inflation and wholesale inventories data.
Any surprises in coronavirus or vaccine developments could also cause shifts in market sentiment and the Pound to US Dollar (GBP/USD) exchange rate.