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US Dollar to Pound Sterling Exchange Rate Slips from Monthly Best on Fed’s Recession Concerns

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US Dollar to Pound Exchange Rate Remains near Best Levels amid Brexit Jitters

A brief round of fresh Brexit deal speculation emerged and was quickly fizzled out yesterday, meaning any attempt the Pound (GBP) had at advancing was short-lived and the US Dollar to Pound (USD/GBP) exchange rate ultimately remained near its best levels.

After mixed Brexit speculation and poor US data last week, USD/GBP slipped 0.8135 to 0.8107.

This week though, USD/GBP has quickly regained those losses due to the Pound’s Brexit jitters. USD/GBP touched a monthly high of 0.8195 in the middle of the week.

However, the US Dollar (USD) has weakened slightly since Federal Reserve news last night, and trends slightly lower at the level of 0.8174 at the time of writing today.

US Dollar (USD) Exchange Rates Slip as Markets Digest a Split Federal Reserve

Yesterday’s most anticipated publication was the Federal Reserve’s September meeting minutes report, and the US Dollar has been slightly weaker in response to the news.

The Fed was notably split on the US monetary policy outlook. While the Fed did cut US interest rates by a quarter point in September, some officials argued it should have been a more aggressive half-point cut and others believed there should be no cut at all.

The more dovish officials believed that a stronger cut would douse the chances of a potential US recession.

Analysts believe the minutes indicate that the outlook for Federal Reserve monetary policy is cloudy, just like the US economic outlook itself. This left the US Dollar weaker amid a lack of clear direction.

According to Chris Rupkey, Chief Financial Economist at MUFG:

‘We would bet that Powell will deliver the third rate cut the markets are clamoring for on Oct. 30 but rate cuts beyond this … start to look less like the insurance style cuts’

Pound (GBP) Exchange Rate Strength Limited amid Brexit Uncertainty

It hasn’t been a good week for the Pound, as hopes for a new Brexit deal being reached by the UK and EU have largely evaporated.

UK Prime Minister Boris Johnson’s proposals for an alternative to the Irish backstop did not impress EU officials, but Johnson’s government has indicated that it will seek a no-deal Brexit rather than drop its proposals.

Yesterday saw brief new hopes in reaction to a report that the EU would be willing to make a concession, but officials quickly denied that such an offer was being considered and the Pound remained weak.

A Brexit delay is still perceived as more likely than a no-deal Brexit, but fading hopes for a deal were overall Pound negative. No-deal Brexit worsened too, as according to Justin Onuekwusi from Legal & General Investment Management:

‘It’s very unlikely we get a hard Brexit on Oct. 31 but the worsening relationship between the EU and UK means the risk of this goes up a little bit.’

US Dollar to Pound (USD/GBP) Exchange Rate Brace for US-China Trade Talks

The US Dollar to Pound (USD/GBP) exchange rate has been sliding from its highs due to Federal Reserve uncertainty clouding the US outlook, but the pair is still holding near its highs overall due to Pound weakness and safe haven demand.

Investors are hesitant to sell safe haven currencies like the US Dollar due to market and geopolitical uncertainties this week.

With US-China trade relations seemingly poor ahead of a fresh round of negotiations, safe haven demand could persist as well.

The US Dollar’s reactions to US-China trade developments are mixed. Higher safe haven demand bolsters the currency, but fears that they could worsen the chances of a US recession weigh on it.

As well as US-China trade developments, the US Dollar to Pound Sterling (USD/GBP) exchange rate will also react to US inflation data this afternoon, as well as possible Brexit developments as always.