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Pound US Dollar Exchange Rate: GBP/USD Steady despite New Brexit Developments

December 5, 2018 - Written by John Cameron

The Pound US Dollar (GBP/USD) exchange rate is range-bound, and is currently trading at $1.2775, after the ‘Greenback’ was hit by today’s disappointing figures for November’s mortgage applications.

GBP found support from yesterday’s Brexit developments, which have softened the threat of a ‘no-deal’ vote with MP Dominic Grieve’s amendment increasing Parliament’s power.

Michael Hewson of CMC Markets, commented:

‘The prospect of no-deal is further away than ever given recent events which means that it’s probably May’s deal or some form of soft Brexit or remain.’

USD, meanwhile, is showing signs of recovering after being dented by investors buying up riskier currencies after the G20 summit saw the US and China deescalate trade tensions.

The US Dollar is expected to remain stable for the rest of today, with US markets being closed in honour of the former US President George H.W. Bush who died at the weekend.

GBP/USD Exchange Rates Range-bound on Slew of Brexit Developments

The Pound (GBP) was strengthened by Brexit news after the ECJ announced that Article 50 can be revoked unilaterally, along with Grieve’s amendment which provides power to Parliament should May’s Breixt deal fail the all-important vote on 11 December.

Economists at JP Morgan have also predicted an increased 40% – from a previous 20% – probability of the UK remaining in the European Union, with economist Malcom Barr commenting:

‘The UK now appears to have the option of revoking unilaterally and taking a period of time of its own choosing to decide what happens next. That time could be used to hold a second referendum on terms entirely decided by the UK.’

Sterling, however, was dented by today’s release of services PMI figures for November, which showed a lower-than-expected figure, falling to 50.4, which is only just above contraction territory.

Today also saw the release of November’s new car sales data, which revealed a -3% decrease on the month.

US Dollar (USD) Exchange Rates Tread Water despite Signs of US Economy Returning to Form

The US Dollar (USD), meanwhile, is down against the Pound (GBP) after ‘Greenback’ investors sought out riskier currencies after the G20 summit US-China trade ‘truce’.

This comes after global trade tension concerns were reignited by President Donald Trump’s latest controversial tweet:

'....I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN.'

As global economic tensions show signs of flaring up again, the US Dollar (USD) could once again benefit from its safe haven status.

Tomorrow will see the release of the US services PMI, with any signs of an increase bolstering the ‘Greenback’.

Jerome Powell, the Chair of the Federal Reserve, is also due to make a speech tomorrow with USD investors taking careful note of any bullish comments that indicate the pace of further rate hikes in the coming year.

Tomorrow also sees the release of initial jobless claims for November, which are expected to decrease, providing a potential leg-up for USD.

Brexit and US-China Trade Relations Remain in Focus

The Pound US Dollar (GBP/USD) exchange rate is likely to be driven by political forces this week, with Brexit developments rapidly unfolding, and mounting pressure on Theresa May as she rallies for support for her Brexit withdrawal agreement.

Friday will see the release of the Halifax house prices index, which is expected to decrease.

The US will also see the release of important non-farm payrolls figures on Friday – along with a slew of other labour ecostats – with markets paying close attention to any signs of change.

Overall, the GBP/USD exchange rate is likely to fluctuate over the coming week, with global economic tensions showing signs of flaring up again, and Brexit coming to a crucial showdown next week.

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