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Pound US Dollar (GBP/USD) Exchange Rate Sinks on UK-EU Brexit Deal Uncertainty

October 14, 2019 - Written by John Cameron

GBP/USD Exchange Rate Falls, Brexit Talks Could Exceed EU Summit

The Pound US Dollar (GBP/USD) exchange rate fell by -0.8% today, with the pairing currently trading around $1.254 after a UK-EU Brexit breakthrough failed to manifest after the weekend’s intensive negotiations. Michel Barnier, the EU’s Chief Negotiator, also added that talks may have to continue after the EU summit this week, further raising doubts of an October 31 Brexit.

Prime Minister Boris Johnson, according to a Downing Street source, also told colleagues that a ‘pathway to a deal could be seen’ but there was ‘still a significant amount of work to get there and we must remain prepared to leave [by the end of the month]’.

However, Jean-Claude Juncker, raised doubts whether Boris Johnson would request for an extension in the event of a possible no-deal between the UK and the EU, saying:

‘It’s up to the Brits to decide if they will ask for an extension. But if Boris Johnson were to ask for extra time – which probably he won’t – I would consider it unhistoric to refuse such a request.’

With no UK economic stats due out today, Sterling traders will be awaiting the speech by Sir Jon Cunliffe, the Deputy Governor for Financial Stability at the Bank of England (BoE) later on this afternoon. Any dovish comments about the economy could, however, further weaken the GPB/USD exchange rate.

USD/GBP Exchange Rate Rises as US-China Trade Doubts Buoy Safe-Haven ‘Greenback’

The US Dollar (USD) rose against the Pound with US markets closed for the bank holiday, Columbus Day. However, with doubts rising over the US-China trade deal increase, traders have been fleeing to the safe-haven of the ‘Greenback’.

Lee Hardman, an Analyst at MUFG, commented:

‘There is a long way to go before even an interim deal is put to paper. This truce remains a “Deal in Name Only” as there is no clear enforcement mechanism attached to the deal. President [Donald] Trump has laid out plans for potentially two further phases of negotiations which would include further talks on intellectual property protection and forced technology transfer.’

However, with the US-China trade war being considered one of the major contributing factors for the recent slowdown in the US economy, ‘Greenback’ traders are remaining cautious.

GBP/USD Outlook: Could Sterling Rise on a UK-EU Brexit Breakthrough?

Sterling traders will be looking ahead to tomorrow’s release of August’s UK average earnings figure, which is expected to improve by 3.7%.

Tomorrow will also see the release of the UK’s ILO unemployment rate for August, which is forecast to hold steady at 3.8%.

Meanwhile, US Dollar (USD) investors will be looking to tomorrow’s release of October’s NY Empire State Manufacturing Index. Any signs of improvement could provide some further uplift for the ‘Greenback’.

Brexit developments will continue to drive the GBP/USD exchange rate this week, and with any signs of an emerging consensus between the UK and the EU ahead of the EU summit this week, we could see Sterling soar.

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