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21.10.2019

Latest Brexit and Fed Speculation Keeps Pound to US Dollar Exchange Rate Teasing 5-Month-Best

While the weekend’s Brexit developments caused a brief bout of panic when markets opened this morning, the Pound Sterling to US Dollar (GBP/USD) exchange rate has since steadied as investors consider the possibility of a relatively soft Brexit being confirmed in the coming days.

Taking advantage of the US Dollar’s (USD) recent weakness, GBP/USD saw significant gains last week. After opening at the level of 1.2651, GBP/AUD surged and gained an impressive three cents, eventually closing the week at the level of 1.2978.

This morning’s GBP/USD dip, on Brexit jitters, was limited and short-lived. Since then, GBP/USD has touched on a fresh 5-month-high of 1.2997 and continues to trend just below those levels at the time of writing.

The outlook remains cloudy though, as while the perceived chances of a no-deal Brexit have lightened, there is still the possibility of major change to the Brexit outlook in the coming sessions.

Within the past few weeks, markets have gone from betting that a Brexit deal looks highly unlikely, to betting that UK Parliament could be on the cusp of voting in favour of Prime Minister Boris Johnson’s new deal.

This has been the primary cause of the Pound’s (GBP) significant gains for much of the past month.

However, fresh uncertainty continues to cloud over the Pound outlook and this is causing mixed movement today.

The Pound has recovered this morning’s losses, but anxiety ahead of potentially major developments this afternoon is limiting further movement.

The UK government intends to hold a meaningful vote on its Brexit plan in UK Parliament today, but the Commons Speaker John Bercow may not allow it if it is seen as merely a repeat of Saturday.

There is also speculation that the government could withhold the vote if amendments are allowed to be made.

The US Dollar (USD) has been enduring a long bearish streak in recent weeks, as the currency’s rivals strengthen, safe haven demand lightens, and US ecostats dampen the US economic outlook.

Due to disappointment in recent US ecostats, bets persist that the Federal Reserve could cut US interest rates at its next policy decision.

On top of this, there is continued speculation that the US economy could fall into recession in the coming years, and fears that lasting US-China trade tensions are damaging the economy.

While the US Dollar has avoided further major losses against the Pound this morning, its persisting weakness is making it easier for the Pound to hold its ground as well despite Brexit jitters.

The US Dollar is on track for its worst month since January 2018.

The US Dollar (USD) has been enduring a long bearish streak in recent weeks, as the currency’s rivals strengthen, safe haven demand lightens, and US ecostats dampen the US economic outlook.

Due to disappointment in recent US ecostats, bets persist that the Federal Reserve could cut US interest rates at its next policy decision.

On top of this, there is continued speculation that the US economy could fall into recession in the coming years, and fears that lasting US-China trade tensions are damaging the economy.

While the US Dollar has avoided further major losses against the Pound this morning, its persisting weakness is making it easier for the Pound to hold its ground as well despite Brexit jitters.

The US Dollar is on track for its worst month since January 2018.

Source: Investing.com
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