Pound US Dollar Exchange Rate Sinks as Brexit Cliff-Edge Fears Continue to Haunt UK Markets

December 23, 2019 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate Sinks as Brexit Cliff-Edge Fears Continue to Haunt UK Markets

GBP/USD Exchange Rate Falls as UK Economic Outlook Dampened by Brexit

The Pound US Dollar (GBP/USD) exchange rate fell by -0.4% today, with the pairing currently trading around $1.294 as markets continue to react negatively to Prime Minister Boris Johnson’s new Withdrawal Agreement Bill, which limits the ‘transition period’ for the UK’s leaving for the EU to before the end of December 2020.

Dean Turner, UK Economist at UBS Global Wealth Management, comments:

‘It’s possible that there will be some bounce in activity given the clarity on Brexit, but any improvement in sentiment is likely to fade as the next Brexit deadline draws closer.’

Pound (GBP) investors are also remaining cautious ahead of the 31st January Brexit deadline, the date when the UK is expected to technically leave the European Union and undergo the transition process.

However, with no economic data releases due out until after Christmas, the GBP/USD exchange rate has struggled with markets continuing to digest the implications of Brexit ahead of the New Year.

USD/GBP Exchange Rate Rises on US-China Trade Deal Hopes

The US Dollar (USD) rose today after US markets have become increasingly hopeful on a Phase One US-China trade deal, a prospect that would provide a boost for the American economy in the near-term.

This follows US President Donald Trump’s comment that a trade deal was ‘very close’ to being completed between the world’s two largest economies.

Some of the US Dollar’s gains have been held back, however, as investors flock the safe-haven American currency for riskier assets.

In US economic news, today saw the release of November’s New Home Sales figure for November, which rose to 0.719 million.

Matthew Speakman, an Economist at Zillow, commented:

‘Homebuilder optimism is at a two-decade high, driven by a growing sense that strong demand for new homes will persist. And construction levels have accelerated in recent months, blowing past expectations and reaching 12-year highs in both starts and permits at different times in the last three months.’

GBP/USD Outlook: Brexit Developments to Continue to Drive Pound

Brexit developments will continue to drive the GBP/USD exchange rate head of Christmas, with any indications of relations between the UK and the EU flaring up over Boris Johnson’s new Withdrawal Agreements Bill being Pound-negative.

The US Dollar (USD), meanwhile, will continue to be affected by US-China trade developments, with any signs of a breakthrough ‘Phase One’ trade deal by the end of the year potentially buoying the GBP/USD exchange rate as investors flock to riskier assets.

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