Pound US Dollar (GBP/USD) Exchange Rate Rises despite Heightened Geopolitical Tensions
The Pound Sterling US Dollar (GBP/USD) exchange rate continued to rise this morning, with the pairing seeing a movement of 0.3%.
The GBP/USD pairing is currently trading at an inter-bank rate of $1.3300.
Sterling’s gains have become subdued compared to yesterday as geopolitical tensions bolster safe havens.
Commenting on these tensions, David Madden of CMC Markets said:
‘Equity markets are in the red this morning as geopolitics is playing on traders’ minds. President Trump is set to meet with the North Korean Leader, Kim Jong-un, to discuss the denuclearisation of the Korean Peninsula. Investors are still wondering when will the US-China trade spat will be resolved.
‘We heard this week that tariffs on Chinese imports won’t be hiked in March, but the trade dispute still needs to be finalized, and we are still a long way from the end result.’
US Dollar (USD) Slips as Fed Takes ‘Patient Approach’
On Tuesday, Federal Reserve Chair Jerome Powell said the bank would take a ‘patient approach’ as it weighs the possibility of interest rate hikes.
However, although Powell’s remarks did not seem to favour an interest rate hike or cut for the immediate future, the GBP/USD pairing continued to rally.
While Powell emphasised that the economy grew last year and the job market remained strong, there were ‘conflicting signals’.
‘While we view current economic conditions as healthy and the economic outlook as favourable, over the past few months we have seen some crosscurrents and conflicting signals.’
‘[…] Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve. We’re in no rush to make a judgement about changes in policy.’
Brexit Optimism Buoys Sterling (GBP)
Sterling continues to rise, buoyed by Tuesday’s Brexit optimism which saw the GBP/USD pairing hit a four-month high.
Sparking the Pound’s rally was the promise from Theresa May that she would give MPs a vote which would allow them to delay Brexit.
The vote will allow MPs to extend Article 50 or rule out a no-deal if they vote it down on 12 March.
This buoyed Sterling, although May reiterated her aversion to extending Article 50 by stating:
‘Let me be clear, I do not want to see Article 50 extended.
‘[…] An extension beyond the end of June would mean the UK taking part in the European Parliament elections. What kind of message would that send to more than 17 million people who voted to leave the EU nearly three years ago now?’
GBP/USD Outlook: Will a Dovish Powell Weigh on USD?
The Pound US Dollar (GBP/USD) exchange rate could continue to rise if there are further reports that suggest the UK will avoid a hard Brexit.
Also likely to influence the pairing this afternoon is Fed Chair Jerome Powell who continues to testify before US Congress.
If Powell’s comments about monetary policy become increasingly dovish, sentiment for the US Dollar could slip.
The GBP/USD exchange rate could slip at the start of Thursday following the release of the UK Gfk Consumer Confidence survey for February.
If confidence slips from -14 to -15 as forecast it could see sentiment for Sterling slide.
The pairing could regain some of its losses in the afternoon following the release of the US preliminary Q4 GDP.
If Q4 annual GDP sees 2.3% growth as forecast, sentiment for the ‘Greenback’ could be dampened, as growth the previous year stood at 3.4%.