GBP USD Exchange Rate Climbs on Market Hopes for Brexit Progress

November 24, 2017 - Written by John Cameron

STORY LINK GBP USD Exchange Rate Climbs on Market Hopes for Brexit Progress

The Pound US Dollar exchange rate climbed today with markets growing increasingly hopeful that UK Prime Minister Theresa May’s visit to Brussels will help move negotiations along.
Meanwhile, fears of limp inflation at the Federal Reserve limited the upward potential of the US Dollar.

GBP Exchange Rate Climbs on May Brexit Talks

Theresa May has once again pushed for progress in Brexit talks, asserting to reporters on Friday that ‘we must step forward together… for both the UK and the European Union to move on to the next stage’.

This kind of phrasing might seem inherently familiar to anyone who’s been following the Brexit negotiation process, with talks historically having only resulted in impasse after impasse.

Nonetheless, markets are now hopeful that the £38bn divorce offer will be greeted by the EU member states on better terms than the previous £20bn offer, and positive comments from Jean Claude Juncker, the EU Commission President, have also added to the anticipation.

When quizzed before the beginning of today’s summit, Juncker asserted that he was confident progress would be made, though he did stop short of elaborating if it would be ‘sufficient progress’ or not.

Irish Foreign Minister Simon Coveney also voiced some optimism, even if it was slightly guarded:

‘There’s a lot of work over the next three weeks, but it’s doable. For phase 2 to happen we need significant movement – on getting credible answers, a credible roadmap to make sure that a hard border doesn’t happen. We can’t move to phase 2 based on aspirations’.

This outlook bolstered the Pound US Dollar exchange rate before the week’s end, though whether this will continue depends entirely on the results of the summit.

US Dollar (USD) Exchange Rate Limited by Inflation Woes from the Fed

The upward potential of the US Dollar remained limited today, with markets anxious over the latest sentiment revealed in the Fed meeting minutes.

The minutes demonstrated that Federal Reserve Officials would be willing to raise interest rates ‘in the near-term’ if the economy strengthens - though many have insisted that a rate hike massively hinges on inflation hitting appropriate levels.

There are now three weeks to go before the Fed’s final policy meeting of 2017, with many now questioning if a third and final rate hike will take place or if it will be delayed until early 2018.

Beyond this, data from the US today proved disappointing with the Markit manufacturing PMI reading for November hitting 53.8, down from the forecast of 55, the services reading hitting 54.7, down from the 55.3 forecast and the composite reading disappointing at 54.6.

These surveys reflected a slightly diminished outlook within each sector, an outlook that quickly hurt demand for the US Dollar.

GBP USD Forecast: Brexit Talks and the Week Ahead

The Pound US Dollar exchange rate could become increasingly volatile in the week ahead, depending on the outcome of Brexit talks at the summit and a variety of releases next week.

Next week’s data for the US will feature the advance goods trade balance, the house price index, the US consumer confidence index, US GDP readings, jobless claims and more Markit PMI assessments – all pertinent events that could knock GBP USD either way.

Beyond Wednesday’s net consumer credit and mortgage approval figures, however, next week’s ecostat calendar for the UK is quite sparse.

This could leave markets even more sensitive to political progressions - with the politically turbulent situation in Ireland’s also liable to cause some volatility.

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TAGS: Daily Currency Updates Dollar Pound Forecasts