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GBP/USD Struggles to Recover Ground in Spite of Brexit Extension

Last week’s high: $1.3118

Last week’s low: $1.3000

 

Fresh Brexit Deadline Extension Offers Limited Support to GBP/USD Exchange Rate

Anxiety over Brexit saw the GBP/USD exchange rate remain under pressure last week, even after EU leaders agreed a fresh extension of the exit deadline.

While the Article 50 deadline was pushed back to the end of October this failed to encourage any significant rebound for the Pound.

With the UK economy now potentially facing another six months of uncertainty over Brexit, investors saw limited cause for confidence ahead of the weekend.

The mood towards the US Dollar, meanwhile, improved as initial jobless claims fell to their lowest level since 1969.

As the US labour market continued to show signs of tightening this offered USD exchange rates a fresh boost, in spite of the less hawkish outlook of the Federal Reserve.

However, as a sharp widening of the Chinese trade surplus encouraged a renewed sense of market risk appetite the US Dollar came under some renewed pressure on Friday.

 

USD Outlook: Trade Anxiety Set to Limit US Dollar Appeal

Confidence in the Pound could pick up this week on the back of March’s UK consumer price index data.

With forecasts pointing towards the headline inflation rate accelerating to 2%, matching the Bank of England’s (BoE) target, GBP exchange rates may find a fresh rallying point.

Even though any change in the inflation rate is unlikely to prompt BoE policy action in the near future, given Brexit uncertainty, this could still support a stronger Pound.

Another month of solid UK retail sales may also offer the GBP/USD exchange rate a leg up.

USD exchange rates, meanwhile, could trend lower in response to any fresh widening of the US trade deficit.

Signs that the world’s largest economy is continuing to feel the impact of its ongoing trade spats with China and the EU may see the US Dollar fall further out of favour with investors.

 

Key Events

16th April

09:30   UK Average Weekly Earnings

17th April

09:30   UK Consumer Price Index

13:30   US Trade Balance

18th April

09:30   UK Retail Sales

13:30   US Advance Retail Sales

 

 

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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

aja@fcgworld.co.uk

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