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Pound US Dollar (GBP/USD) Exchange Rate Rises Despite US Political Tensions Easing

February 12, 2019 - Written by John Cameron

GBP/USD Exchange Rate Increases despite US Reaching Consensus on Border Security

The Pound US Dollar (GBP/USD) is up today and is currently trading around $1.2850 on the inter bank market.

The US Dollar (USD) fell against the Sterling (GBP) today despite the news that the US Democrats and Republicans had finally come to a consensus ‘in principle’ over border security – potentially averting another partial government shutdown that was due to occur on Friday.

However, President Donald Trump – although not being granted the $5.7bn needed for the Mexican border wall – said provocatively:

‘We're building the wall anyway.’

Many USD traders, however, have been relieved that the likelihood of another US government shutdown has been decreased, after the continuing political tensions are still affecting overall confidence in the ‘Greenback’.

There are no notable US economic data releases today, with many US Dollar traders focusing on political developments instead.

GBP/USD Exchange Rate Rises as May Bids to Buy Time for Brexit

Prime Minister Theresa May delivered a speech before the House of Commons today, in which she vowed to allow MPs to pass judgement on the newly-amended Brexit agreement on 27 February – which has been interpreted as being a bid to buy more time.

May said:

‘When we achieve the progress we need we will bring forward another Meaningful Vote.’

This has relieved some pressure on the Pound, with concerns calmed over a Brexit no-deal by the extension, and the ‘meaningful vote’ heightening the possibility of a second-referendum or an extension to Article 50.

Meanwhile, the Governor of the Bank of England, Mark Carney, gave a speech in London today, saying:

‘Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. In these respects, Brexit could affect both the short and long-term global outlooks.’

The speech was well received and reassured Sterling investors that the central bank has a plan for Brexit.

USD/GBP Outlook: Brexit and US Political Developments in Spotlight

GBP traders will be looking ahead to tomorrow’s publication of the yearly UK CPI figures for January, which are expected to decrease.

These will be followed by the printing of the UK retail prices index figures for January, which are also expected to fall.

Tomorrow will also see the release of the UK PPI figures for January, which are expected to increase, and potentially providing some uplift for the Sterling.

USD investors, meanwhile, will be looking forward to the publication of the US CPI – excluding food and energy – figures tomorrow.

Tomorrow will also see the printing of the US monthly budget statement for January, and with any signs of an increase potentially buoying the USD/GBP exchange rate.

The GBP/USD exchange rate will most likely be dictated by political developments in the coming week, with Brexit developments on-going as Theresa May attempts to buy more time, and the US narrowly avoiding another government shutdown as tensions show signs of fading between the White House and Congress.

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