Pound to US Dollar Exchange Rate Slips despite Market Optimism on Vaccine News
Updated 16:50 GMT 09/11/2020:
Despite higher market sentiment and weaker safe haven demand today, the Pound Sterling to US Dollar (GBP/USD) exchange rate has been under pressure.
GBP/USD is currently trending just below the week’s opening levels, near the level of 1.3134.
Sterling (GBP) is struggling on Brexit uncertainty, despite higher market sentiment.
Today’s news that a coronavirus vaccine effort by Pfizer had made major progress further boosted market sentiment, but still Sterling failed to gain on the US Dollar’s (USD) weakness.
(Originally published 11:46 GMT 09/11/2020)
Pound to US Dollar Exchange Rate Holds onto Gains as Market Relief Weighs on USD
When markets opened this morning, the Pound Sterling to US Dollar (GBP/USD) exchange rate was largely able to hold onto last week’s impressive gains. As Democrat Joe Biden is projected to be the next US President, markets are seeing a ‘Biden Bounce’.
After opening last week at the level of 1.2943, GBP/USD trended higher and ultimately saw impressive gains of over two cents. GBP/USD closed last week at the level of 1.3154.
Since markets opened this morning, GBP/USD tested levels even higher, touching on a high of 1.3195. While the pair has struggled to hold that best level, it has still sustained last week’s impressive gains as of the time of writing.
Looking ahead, the Pound (GBP) has the potential to climb even further if Britain’s Brexit outlook improves in the coming weeks. UK and EU negotiators are aiming for a Brexit deal to be reached this month.
Pound (GBP) Exchange Rate Steadies as Markets Await Next Brexit Developments
The Pound saw high volatility last week. It was hurt by uncertainty over Britain’s second coronavirus lockdown, combined with Brexit uncertainty and jitters over the US 2020 Presidential Election.
Now that the US 2020 Presidential Election has a fairly clear outcome though, the Pound’s movement is steadying.
The British currency is focusing ahead on UK-EU Brexit negotiations, ahead of what could be the final weeks for talks.
Analysts generally expect a deal to be reached. With US political uncertainty calming, the Pound can focus more on Brexit optimism again and this is supporting Sterling.
According to FX Analysts at ING:
“We therefore lean in favour of a GBP-positive outcome, although the lack of short-term risk-premia or net-short positioning in GBP both highlight lingering complacency to no-deal risk and a magnified downside risk if negotiations collapse,”
US Dollar (USD) Exchange Rate Slides as Investors Move Away from Safe Havens
The US Dollar (USD) is a safe haven currency, which is often appealing in times of market uncertainty. As a result, many investors kept one foot in the US Dollar door last week amid the unexpectedly tight US 2020 Presidential Election.
However, with the US election being called for Democrat Joe Biden over the weekend, markets are calming again since opening today.
As a result, market safe haven demand has been softening. Investors are less eager to hold onto the safe haven US Dollar and this is keeping the US Dollar weak.
According to Neil Jones, European Head of Hedge Fund Sales at Mizuho:
‘The US Dollar, as one would expect, is a safe-haven currency and still the world leader in terms of outperformance in times of risk aversion and so one would expect it to be on the backfoot in times of risk preference’
Pound to US Dollar (GBP/USD) Exchange Rate Could See Further Gains on Brexit Hopes
The Pound to US Dollar (GBP/USD) exchange rate has put in strong gains over the past week, but there may be more advances ahead.
If the Brexit outlook improves, the Pound is likely to see further relief gains.
Analysts speculate that the UK and EU are getting closer to a Brexit deal of some kind. There is speculation that a deal could be reached within the coming weeks.
As Brexit speculation returns to focus, developments in negotiations are likely to drive the Pound outlook. Meanwhile, the outlook for safe havens like the US Dollar will be a little lower unless there is fresh political uncertainty.
If US President Donald Trump’s legal challenges to the election result actually make progress for example, this could cause uncertainty which would boost the safe haven US Dollar.
Failing that though, the Pound to US Dollar (GBP/USD) exchange rate outlook could also be influenced by UK and US job data due for publication tomorrow.