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Pound to US Dollar Exchange Rate Slips Back from Near 2-Month-Best as Brexit Uncertainties Flare

Pound to US Dollar Exchange Rate Still Trending Higher on Market Sentiment 

Despite weakness in the Pound (GBP) today, the Pound Sterling to US Dollar (GBP/USD) exchange rate has still been trending higher this week. The US Dollar (USD) is unappealing as investors move away from safe havens. 

US Dollar losses is keeping GBP/USD advancing. Since opening this week at the level of 1.3285, GBP/USD has been trending with an upside bias. 

Earlier this morning, GBP/USD touched on a high of 1.3397. This was the best level for the pair since the beginning of September, almost three months ago. 

At the time of writing, GBP/USD is trending a little lower in the region of 1.3352. This is still considerably above the week’s opening levels however. 

Pound (GBP) Exchange Rates Weighed by Lasting Brexit Uncertainty 

Market speculation that the UK and EU are closing in on a Brexit deal has been unable to keep the Pound at its best levels. This is because the possibility of a no-deal Brexit persists, and no-deal fears are once again weighing on Sterling’s outlook today. 

After days of strong performance on Brexit deal hopes, Sterling is sliding back from highs today. 

Investors are anxious that recent comments from UK and EU officials have been less optimistic. Officials indicate that they are prepared for a no-deal Brexit, and are once again taking tougher negotiation stances. 

FXStreet’s Analyst Yohay Elam said: 

‘Barnier is set to end his quarantine – needed after a team member tested positive for coronavirus – and travel to the British capital for face-to-face talks. However, media reports suggest that he may call off his trip if the UK does not offer concessions.’ 

US Dollar (USD) Exchange Rates Struggle to Recover on US Gloom and Market Sentiment 

Investors have been hesitant to buy the US Dollar this week. The US Dollar is a safe haven currency, so it is unappealing in times of rising market confidence. 

Recent news on coronavirus vaccines and US politics have made markets more optimistic about the global outlook. This is making investors look for other currencies over safe havens. 

On top of this, the US Dollar is being weighed by concerns about the health of the US economy amid the coronavirus pandemic. 

Expectations for looser monetary policy from the Federal Reserve are also limiting the US Dollar’s appeal. According to Lee Hardman, Currency Analyst at MUFG: 

‘the developments support our view that loose Fed policy will remain a weight on the US Dollar next year. 

We are wary in the near-term though that the market is already very short US Dollars which slows downward momentum and poses the risk of short squeezes,’ 

Pound to US Dollar (GBP/USD) Exchange Rate Movement Could Be Quieter amid Thanksgiving 

Unless there are some notable Brexit developments in the coming days, the Pound to US Dollar exchange rate could be in for quieter movement in the coming sessions. 

The Pound’s movement will continue to focus on Brexit developments. 

If there are optimistic comments from UK and EU officials, Brexit deal hopes could firm again and the Pound could have an easier time sustaining gains. On the other hand, rising no-deal Brexit fears could instead see GBP/USD falling further from recent highs. 

US markets will be closed to observe the Thanksgiving national holiday for the remainder of the week. This could limit the US Dollar’s movement amid a lack of fresh domestic news. 

However, the safe haven currency will still be driven by shifts in market sentiment. If global market uncertainty worsens again, safe haven demand could rise and the Pound to US Dollar exchange rate is more likely to fall.