Pound US Dollar (GBP/USD) Exchange Rate Rises as UK-EU Trade Deal Still Possible

March 6, 2020 - Written by John Cameron

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Rises as UK-EU Trade Deal Still Possible

Pound Sterling US Dollar (GBP/USD) Exchange Rate Edges Higher on Upbeat Barnier

The Pound Sterling US Dollar (GBP/USD) exchange rate rallied on Friday, leaving the pairing trading at around $1.2995.

The Pound was able to make gains against a weaker US Dollar following comments from the European Union’s Brexit chief negotiator, Michel Barnier.

Barnier stated that a trade deal between the European Union and Britain was still possible this year despite the ‘very serious’ differences each side had about a future relationship.

London and Brussels concluded their first round of talks and are scheduled to reconvene on 18 March.

Sterling also received support after the Bank of England (BoE) decided not to follow the Federal Reserve and slash interest rates in response to the coronavirus outbreak.

US Dollar (USD) Falls on Fears of Second Fed Rate Cut This Month

Although the main driver for the British currency is likely to be the coronavirus outbreak, the Fed’s surprise move continues to weigh on Dollar sentiment.

This week the US Federal Reserve unexpectedly cut interest rates by 50 basis points in an attempt to offset the economic impact of the virus.

Mounting worries the Fed will have to slash rates once again during this month’s monetary policy meeting have weighed on ‘Greenback’ sentiment.

According to Kazushige Kaida, head of foreign exchange at State Street Bank in Tokyo:

‘US bond yields have sunk to unbelievable levels. The Fed’s fast responses will be applauded in the long run. But in the near term, even if it cuts rates, it won’t stop the virus. Markets are hoping for more measures such as tax cuts and steps to support funding for cash-strapped firms.’

Markets are now pricing in another 50 basis point cut for a second time this month, although the currency has not suffered declines across the board.

The Dollar continues to retain its safe-haven status against riskier assets, although GBP/USD continued to edge up by around 0.4%.

Pound US Dollar Outlook: US Non-Farm Payrolls in Focus

Looking ahead to this afternoon, the US Dollar (USD) could suffer further losses against the Pound (GBP) following the release of February’s non-farm payrolls.

If today’s data reveals the US economy has not added as many jobs to the economy as expected, the ‘Greenback’ will slump.

Meanwhile, a slew of speeches from Federal Reserve policymakers could spark movement of US Dollar exchange rates.

If Fed policymakers suggest the central bank is going to cut rates again as soon as during this month’s meeting, the Pound US Dollar (GBP/USD) exchange rate will edge higher.

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TAGS: Pound Dollar Forecasts