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Pound to US Dollar (GBP/USD) Exchange Rate Rises on Hopes of a Last-Minute Brexit Deal

October 27, 2020 - Written by John Cameron

GBP/USD Exchange Rate Edges Higher Despite Grim Outlook for British Retail Sector

The Pound to US Dollar (GBP/USD) exchange rate rose by 0.2% today, with the pairing currently trading around $1.304.

Sterling edged higher against the US Dollar (USD) following news that Spain and Gibraltar are seeking a last-minute Brexit deal.

This follows the EU Chief Negotiator Michel Barnier’s extended stay in London – until Wednesday – to continue UK-EU Brexit talks.

As a result, GBP investors are now more confident the two sides could secure a post-Brexit trade deal before the end of the year.

In UK economic news, today saw the release of the latest UK CBI Distributive Trades survey for October, which fell below forecasts to -23.

CBI Principal Economist Ben Jones was downbeat in his analysis, saying:

‘The fall in retail sales in October is a warning sign of a further loss of momentum in the economy as coronavirus cases pick up and restrictions are tightened across many parts of the country.

‘It’s no surprise that sales have dipped despite no new direct restrictions on retail in England, as the evidence from earlier in the year suggests consumers become more cautious as case numbers rise.’

US Dollar (USD) Struggles Following Stronger-Than-Expected Economic Data

The US Dollar (USD) dipped following a stronger-than-expected surge in September’s US Durable Goods Orders figure, which rose by 1.9%.

As a result, risk-sentiment has improved on signs that the world’s largest economy could be on the road to recovery.

Paul Ashworth, the chief U.S. economist, commented:

‘The 1.9% rise in durable goods orders in September demonstrates that the economic recovery isn’t entirely dependent on consumers, with business equipment investment recording a swift bounce back to pre-pandemic levels.’

Additionally, hopes of a Covid-19 vaccine have also weakened demand for the safe-haven ‘Greenback’.

Jeffrey Halley, the senior market analyst at OANDA, commented:

‘Exploding Covid-19 infections across the country could yet dent the American fourth-quarter comeback. Looked at in conjunction with Europe’s situation, there are severe threats to the consumption side of the global recovery.’

GBP/USD Forecast: Could Brexit Trade Deal Hopes Boost Sterling This Week?

US Dollar (USD) investors will be awaiting tomorrow’s speech from Robert Kaplan, the president of the Federal Reserve Bank of Dallas.

Any downbeat comments about the US economy would bolster demand for the safe-haven ‘Greenback’.

Brexit developments will continue to drive the GBP/USD exchange rate this week.

As a result, we could see Sterling head higher if UK-EU trade talks continue to show positive developments towards a possible post-Brexit trade deal.

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