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Pound to US Dollar (GBP/USD) Exchange Rate Rises as Risk Sentiment Improves on US Stimulus Hopes

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GBP/USD Exchange Rate Edges Higher as Risk Sentiment Rises Dampening Demand for the ‘Greenback’

The Pound to US Dollar (GBP/USD) exchange rate edged higher today, with the pairing currently trading around $1.297.

The US Dollar (USD) edged lower today as investors remain cautiously optimistic over a US Covid-19 fiscal stimulus package, and a possible Covid-19 vaccine by the end of the year.

Edward Moya, a senior market analyst at Oanda, New York, commented:

‘There is growing optimism that there is going to be one last strong attempt to get a stimulus deal.

‘[But markets] are not holding their breath, but there’s hope that once we get past the election, something will be able to get done so that we don’t have to wait until February, which would be way too long for a lot of small businesses and families.’

As a result, safe-haven demand for the US Dollar (USD) has slipped, especially following signs that China – the world’s second-largest economy – is on the road to recovery.

In US economic data, today will see the release of the latest Building Permits figures for September.

If these confirm consensus and rise to 1.52 million, then we could see the ‘Greenback’ suffer as hopes grow for the world’s largest economy’s recovery.

Pound (GBP) Rises as Hopes for a Brexit Deal Boost UK Market Optimism

The Pound (GBP) rose on hopes that the UK and the EU could finally concede on a post-Brexit trade deal. This is despite Number 10 effectively writing off further talks earlier this week.

Nonetheless, the EU’s Chief Negotiator, Michel Barnier, agreed to ‘intensify’ trade talks, leaving some room for the two sides to secure a trade agreement before the year-end.

A spokesperson for Downing Street said:

‘This means an EU approach consistent with trying to find an agreement between sovereign equals and with acceptance that movement needs to come from the EU side as well as the UK. The two teams agreed to remain in close touch.’

However after Prime Minister Boris Johnson told people to expect an Australia-style trade deal, GBP investors have remained generally cautious.

Sterling investors are also cautious as the UK faces intensified lockdowns.

Wales is now under a strict lockdown, while Manchester is expected to accept a Tier Three lockdown following discussions with Number 10.

Consequently, we could see the GBP/USD exchange rate dip later today as uncertainties rise over the future of the British economy.

GBP/USD Forecast: Could a UK-EU Brexit Breakthrough Boost Sterling this Week?

US Dollar (USD) investors will be awaiting tomorrow’s release of the latest US MBA Mortgage Applications for October.

Any improvement in American mortgage applications could boost confidence in the economy.

However, this could weigh on the ‘Greenback’ as investors turn to riskier assets as the world’s largest economy improves.

Pound (GBP) traders will be awaiting September’s UK CPI report. If this shows a marked improvement in the British economy, then GBP could head higher.

The GBP/USD exchange rate will, however, continue to remain sensitive to Brexit developments over the course of the week.

Any indications that UK-EU negotiations could concede on a post-Brexit trade agreement would prove GBP-positive.