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Pound to US Dollar Exchange Rate Near Quarterly Best amid Persisting Weakness in USD Outlook

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Pound to US Dollar Exchange Rate Avoids Losses despite Fresh Brexit Panic 

Fears over the possibility of a no-deal outcome for Brexit surged again today, but the Pound Sterling to US Dollar (GBP/USD) exchange rate has only seen modest losses. Investors are hesitant to buy the US Dollar (USD) too much as the US outlook remains gloomy. 

Amid the US Dollar’s weakness, GBP/USD didn’t see much in the way of losses last week. GBP/USD edged lower from 1.2622 to 1.2568, briefly touching even lower. 

This week’s movement has been comparatively bullish though. A rebound in Pound (GBP) demand briefly pushed GBP/USD higher to the level of 1.2765 yesterday. This was the best level for the pair in over a quarter, since March. 

While today’s Pound losses did knock GBP/USD, the pair has only tumbled around a cent. GBP/USD trends near the level of 1.2668 and has sustained around half of this week’s advances. 

Brexit uncertainty is clouding over the Pound outlook. However, the US outlook remains dire too as markets doubt the nation will deliver major fiscal stimulus to help with the coronavirus pandemic. 

Pound (GBP) Exchange Rates Knocked by Fresh No-Deal Brexit Scare 

The Pound has been giving up some of its early week gains today. Market hopes over positive coronavirus and Brexit developments have been replaced with fresh uncertainty and scepticism. 

Today has seen reports emerge that the UK could be on the brink of giving up on UK-EU trade negotiations. Amid a lack of progress and staunch disagreement on UK and EU stances regarding fishing rights, some sources suggest talks may fail. 

While some analysts suggest these reports could be a negotiation tactic, the increasingly real possibility of a no-deal Brexit is still weighing on Sterling. 

On top of this, the vaccine hopes that had bolstered Sterling earlier in the week were seen as having some downsides. According to Yohay Elam, Analyst at FXStreet: 

‘The encouraging news of the Phase 1/2 trial conducted in collaboration with AstraZeneca has now made a place for some skepticism. Doubts about the efficiency of that vaccine candidate have taken some of the wind out of the Pound’s gains. Another blow came from the New England Journal of Medicine, which reported that recovered coronavirus patients saw their antibodies fading away after an average of 73 days. The long road toward resolving the issue is weighing on stocks and boosting the Dollar.’ 

US Dollar (USD) Exchange Rates Unappealing as US Outlook Remains Filled with Uncertainties 

The US Dollar briefly saw a rise in demand earlier in the week. Investors became hopeful for new US fiscal stimulus and a more serious stance on the coronavirus pandemic. 

However, these gains were short-lived. There is still little real optimism that US fiscal stimulus can be reached amid broad disagreements between US parties. 

With US stimulus hopes still weak, the US Dollar has also struggled to really benefit from market safe haven demand. Even as coronavirus and US-China trade fears rise, the US coronavirus and economic outlooks are too filled with uncertainty for investors to want to buy the US Dollar. 

According to Derek Halpenny, Strategist at MUFG: 

‘We are of a long way off another form of hawkish guidance the like of May 2013, so new lows in 10-year real yields look likely which will only reinforce the medium-term negative outlook for the Dollar’ 

Pound to US Dollar (GBP/USD) Exchange Rate Likely to Remain Volatile on Currency Weakness 

Both the Pound and US Dollar have been highly volatile in recent weeks. Both currency outlooks have been filled with uncertainties around the coronavirus and politics. 

This is likely to continue in the coming weeks as well. 

The Pound could remain weak going forward as no-deal Brexit fears return to markets. Even if the latest headlines are just negotiation tactics, analysts increasingly believe that a soft Brexit is unlikely. This could mean lasting Pound weakness. 

The US Dollar on the other hand is being weighed by concerns that the US economy will continue to struggle amid the coronavirus pandemic. 

Friday’s upcoming UK and US PMI projections could have a notable influence on the Pound to US Dollar (GBP/USD) exchange rate if they surprise investors.