Pound to US Dollar Exchange Rate Gaining Ahead of Federal Reserve Minutes
Following yesterday’s slide in the Pound Sterling to US Dollar (GBP/USD) exchange rate, the pair has been rebounding today thanks to continued weakness in the US Dollar (USD). The Pound’s (GBP) movement has cooled, but Brexit uncertainties persist.
Last week saw volatile GBP/USD movement as the pair edged higher from 1.2291 to 1.2334, and GBP/USD has already shed those gains this week so far.
GBP/USD touched on a one-month-low of 1.2202 yesterday after the Pound’s slump on Brexit fears.
While GBP/USD is climbing again today, the pair has only been able to recover to around 1.2250 so far – still lower than the levels seen for most of the past week.
Pound (GBP) Exchange Rates Volatile as Brexit Speculation Continues to Shift
Investors sold the Pound across the board yesterday.
The British currency saw major losses in reaction to reports that UK-EU Brexit negotiations had more or less collapsed, following a discussion between UK Prime Minister Boris Johnson and German Chancellor Angela Merkel.
Following the discussion, UK officials indicated that they now believed the chances of a deal being agreed were highly unlikely.
It left markets predicting that the most unlikely outcome for Brexit at the end of the month was either another delay, or a worst-case scenario no-deal outcome.
However, Sterling found a little fresh support this morning amid new speculation that the EU was preparing to give a concession in talks.
The Times newspaper reported that the EU could offer a mechanism for Northern Ireland to choose to leave the controversial backstop after a period of time. Hopes for a deal improved slightly, but the mixed messages on Brexit left Sterling volatile overall.
US Dollar (USD) Exchange Rates Weaken on Fresh US-China Trade Tensions
A solid part of the Pound to US Dollar (GBP/USD) exchange rates rebound this morning has been due to fresh US Dollar weakness, as investors digest the latest tensions in the US-China trade war.
Markets had recently been hoping for relations between the nations to improve, as high-level negotiations are set to take place in the coming week.
However, this morning tensions flared up once more, as China has responded to US visa restrictions on Chinese officials with new restrictions of its own.
While Chinese officials indicate they are open to a partial trade deal and this has limited US Dollar weakness, analysts doubt the US will play along.
As a result, the US Dollar remained ultimately unappealing as investors awaited this evening’s Federal Reserve news.
Pound to US Dollar (GBP/USD) Exchange Rate Outlook Could Shift on Fed News
While Brexit and US-China tensions have been driving the Pound to US Dollar (GBP/USD) exchange rate in recent sessions, market focus could turn to the US monetary policy outlook later today.
Today’s economic calendar is fairly quiet save for some US wholesale prices, but markets are highly anticipating the Federal Reserve’s latest meeting minutes report, due for publication this evening.
The Fed’s tone has been more hawkish than expected recently, despite signs of slowing US economic activity.
As a result though, if the minutes show that some Fed officials are becoming more dovish, Fed interest rate cut bets could solidify and the US Dollar could be in for fresh losses.
This, as well as the possibility of UK-EU Brexit negotiations starting up again, could leave GBP/USD stronger in the coming days.
On the other hand though, if the Fed maintains its hawkish tone and there are no other signs that the bank will become more dovish, the US Dollar could sturdy and the Pound to US Dollar (GBP/USD) exchange rate could slide again.