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GBP/USD Climbs Almost Two Cents on Hopes over Brexit Deal

Last week’s high: $1.3132

Last week’s low: $1.2901

US Dollar Resilience Fades as Trade Jitters Abate Slightly

The Pound to US Dollar exchange rate saw significant gains last week due to numerous factors both domestic and global.

The primary cause of Pound strength throughout the week was comments from EU Chief Negotiator Michel Barnier, who said at the beginning of the week that he believed it was ‘realistic’ to expect that a UK-EU Brexit deal could be reached within the next eight weeks. This had the effect of lessening Brexit-related fears and helped to support the British currency.

In the middle of the week, GBP/USD benefitted further from fresh weakness in the US Dollar. As the US Dollar is a safe haven currency, news that the US and China could be seeking fresh trade negotiations left investors less hesitant to move funds into high-yield economies, thus weakening the US Dollar.

On top of this, the US Dollar was pressured by underwhelming inflation stats on Thursday which dampened market expectations for Federal Reserve hawkishness.

Nevertheless, the Pound to US Dollar was unable to hold its best levels at the end of the week, as the US and China both indicated that they were not willing to make any concessions or sacrifices in trade talks.

USD Outlook: UK Inflation Ahead, Political Developments to Remain Influential

Could the Pound’s recovery rally against the US Dollar be set to continue throughout the next week? If upcoming UK data is strong and there are further developments in UK-EU Brexit negotiations, that would be more likely.

The US Dollar, on the other hand, could strengthen if US-China trade tensions significantly worsen again.

Some notable data could also influence the Pound to US Dollar exchange rate next week. Britain’s August inflation rate and US building and housing starts from August will be published on Wednesday, with UK retail sales following on Thursday and US PMI projections from Markit on Friday.

 

Key Events

17th September

13:30 US Empire Manufacturing Index

19th September

09:30 UK Inflation Rate

13:30 US Building Permits and Housing Starts

20th September

09:30 UK Retail Sales

13:30 US Philadelphia Fed Manufacturing Index

15:00 US Existing Home Sales

21st September

09:30 UK Public Sector Net Borrowing

11:00 UK CBI Industrial Trends Orders

14:45 US Markit PMIs

 

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

Arron Morris
Senior Currency Broker
T: 01442 892 065

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