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GBP USD Exchange Rate Volatile over New 'Brexit' Concerns

December 8, 2016 - Written by James Fuller

The GBP USD exchange rate has been meet by increased volatility today, fluctuating by around half a cent as 'Brexit' concerns weighed on the Pound.

Pound US Dollar (GBP USD) Pressured by 'Brexit' Concerns



The Pound US Dollar (GBP USD) exchange rate fell this afternoon as it was reported that some major banks are making plans to move some of their operations from London to Paris in reaction to 'Brexit'.

France's leading financial regulator, Benoit de Juvigny said that ‘large international banks’ and ‘many other companies’ have begun to make informal inquiries into moving to the French capital once the UK splits from the EU, over fears they will lose their passporting rights and be unable to clear the Euro (EUR).

Mr de Juvigny also indicated that other financial centres in Europe such as Frankfurt and Luxembourg were also making moves to welcome banks should they seek to leave London after 'Brexit'.

The news weighed heavily on Sterling as it appeared to confirm what many investors have long feared, that the UK’s vote for 'Brexit' would cause major banks and other companies to relocate to the continent to ensure continued access to the single market.

US Dollar Bolstered by Employment Data



The US Dollar was strengthened this afternoon after US Continuing Jobless Claims dropped from 2084k to 2005k in November, outpacing predictions that it would only drop to 2048k, thanks to last week’s improvement in US employment data as unemployment dropped from 4.9% to a nine-year low of 4.6% in November

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Meanwhile the ‘Greenback’ continues to be bolstered by next week’s Federal Reserve meeting when Fed policymakers are widely expected to vote for a rise in US interest rates for December.

Investors are near certain that the Fed will announce a rate hike next week as the market odds hovered around 95% at the time of writing. Recent comments from Fed policymakers and the drop in US unemployment are signalling that a rate rise is imminent.

GBP USD Exchange Rate Forecast: UK Trade Balance Data May Boost Pound



The GBP USD exchange rate may improve tomorrow with the release of the latest UK Trade Balance Data, with it forecast to rise from -£5.2bn to -£3.4bn in October.

Long-term the Pound is likely to tumble as Wednesday’s disappointing manufacturing data may indicate a further downtrend in the UK data after the vote to leave the EU earlier in the year as economists predict that the recent resilience shown by the UK economy is misleading as the real economic impact of 'Brexit' is likely to show next year. As HSBC said in a client note this week;

‘It’s not so much that the U.K. is out of the woods already. More, in our view, that the U.K. has not yet entered the woods.’


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