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Brexit Speculation Helps Pound Surge against Mixed US Dollar

Last week’s high: $1.3134

Last week’s low: $1.2836


GBP/USD Benefits from Lack of Fresh US Dollar Demand, Brexit Hopes

Despite some strong US data last week, the US Dollar outlook was ultimately unchanged as the figures continued to indicate what markets already expected.

While US ecostats have shown that the US economy is holding up well, there are still signs of the global economic slowdown’s impact, and US political tensions remain a notable weight on US Dollar demand.

The US Dollar is being impacted by the ongoing US government shutdown, which is increasingly likely to have a negative impact on the US economy, as well as uncertainties about US-China trade tensions.

This made it easier for the Pound to sustain strong gains last week. Rising hopes that MPs would vote in favour of potential amendments or legislation to prevent a no-deal Brexit have bolstered hopes for a delay to the formal leaving date.

While a Friday boost for the Pound was short-lived due to persistent doubts that the government’s Brexit bill can pass, GBP/USD still sustained major gains throughout the week overall.


USD Outlook: Market Anticipates US Job Stats and Major Brexit Developments

Political developments are likely to drive the Pound to US Dollar exchange rate for the first half of next week, amid a lack of major economic stats due for publication. Any news regarding the US government shutdown, US-China trade tensions, and of course the Brexit process, are the biggest potential drivers of GBP/USD movement through Wednesday.

Parliament will hold another debate on the government’s Brexit plans on Tuesday. During the debate, MPs may vote on legislation that could influence the direction the process takes, or even delay the process altogether. If the chances of a no-deal Brexit lessen, the Pound will almost certainly strengthen.

Brexit news could influence GBP/USD throughout the week, but the US Dollar could take priority from Wednesday onwards.

The Federal Reserve will hold its January policy decision on Wednesday evening and investors are anxious to see if the bank’s tone on 2019 monetary policy has changed. US-China trade talks are also set to resume on Wednesday.

Of course, influential US Non-Farm Payroll and ISM manufacturing stats due on Friday could also influence the US Dollar.


Key Events

28th January

13:30 US Chicago Fed National Activity Index

15:30 US Dallas Fed Manufacturing Index

29th January

15:00 US CB Consumer Confidence

19:00 UK Parliament Vote on Brexit Deal

30th January

US-China Trade Talks

09:30 UK Mortgage Lending and Approvals

13:15 US ADP Employment Change

15:00 US Pending Home Sales

19:00 US Federal Reserve Police Decision

31st January

00:01 UK GfK Consumer Confidence

14:45 US Chicago PMI

1st February

09:30 UK Manufacturing PMI

13:30 US Non-Farm Payroll Report

15:00 US Manufacturing PMI

15:00 US Michigan Consumer Sentiment


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To keep up to date with the US Dollar, visit the USD blog in our Currency News section.

Alastair Archbold

Foreign Exchange Manager

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