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Pound US Dollar (GBP/USD) Exchange Rate Climbs as UK and EU Agree Brexit Transition Terms

March 19, 2018 - Written by John Cameron

Davis and Barnier Reveal Notable Progress in Brexit Transition Talks – Pound US Dollar (GBP/USD) Exchange Rate Climbs



The Pound US Dollar (GBP/USD) exchange rate hit the ground running on Monday, bolstered by news that a ‘decisive step’ towards a final Brexit transition deal has been achieved in negotiations.

UK Brexit Secretary David Davis and EU Chief Negotiator Michel Barnier spent the weekend in a series of intensive talks regarding the Brexit transition period, with the extent of their work now revealed in a press conference.

Barnier announced that there is now agreement on the rights of 4.5m EU citizens in the UK and 1.2m UK citizens in the EU post-Brexit, as well as a ‘back-stop’ option in order to avoid a hard border in Ireland – though more work needs to be done on this front.

Nonetheless, now that Downing Street and Brussels have agreed on the terms of an agreement it can be signed off by UK Prime Minister Theresa May and fellow leaders at the EU summit later this week.

Barnier surmised that the new draft legal text points to a ‘decisive step’ forward, but that it was ‘not the end of the road’.

Davis, on the other hand, acknowledged that businesses should now have greater clarity, stating:

‘We must seize the moment and carry on the momentum of the last few weeks The deal today should give us confidence that a good deal for the UK and the EU is closer than ever before’.

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The market response to this news was overwhelmingly positive, with an otherwise quiet UK data day making today’s Brexit-related news the centre focus for investors.

US Dollar (USD) Exchange Rates Struggle to Find Support – China Trade Tariffs Ahead?



Today is a rather quiet day for US data, but last week’s run of cabinet shifts in the Trump administration continue to prove significant movers for the market.

Investors were slightly concerned by news that US President Donald Trump’s latest Financial Advisor, Larry Kudlow, echoed a similarly tough stance on trade with China, asserting that China’s own import tariffs and sizable trade surplus against many global powers warranted ‘a tough response’.

Beyond this, Kudlow called for a ‘coalition of the willing’ against China’s trade practices, news that spooked some investors as it seemed to escalate the possibility of a global trade war.

President Trump is also expected to announce wide-ranging tariffs on imported Chinese goods this week, with tariffs liable to affect a large range of consumer goods.

This approach is also supported by Commerce Secretary Wilbur Ross and Advisor Peter Navarro, however, with retaliatory measures from China liable to be limited due to the fact that China would have a great deal more to lose in the event of an escalation.

Nonetheless, markets tend to abhor any form of intervention on trade, and this news continues to limit the US Dollar.

Pound US Dollar (GBP/USD) Exchange Rate Forecast: UK Inflation and US Fed Rate Decision Ahead



Last week might’ve been a quiet one for the UK, but this week’s run of UK and US data releases should give plenty for the markets to chew over.

Anticipation has steadily built for Wednesday’s US Federal Open Market Committee (FOMC) rate decision, with volatility highly likely depending on the result.

The US economy has been picking up momentum, and Fed Chairman Jerome Powell as well as a high number of Fed Presidents have acknowledged that the bank might need to raise interest rates 4 times this year (rather than 3) in order to not get caught flat-footed.

Some analysts have been hesitant, however, arguing that the recent soft US inflation and wage growth readings could push the Fed away from such a speedy run of interest rate hikes.

Back across the pond, markets will be assessing tomorrow’s UK inflation readings, Wednesday’s employment figures and Thursday’s Bank of England (BoE) rate decision and statement, with better-than-expected inflation or wage growth liable to pave the way for a UK rate hike in May.

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