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Pound US dollar exchange rate soars past $1.29 as UK ‘strikes financial services Brexit deal’ with EU

currency-newsPound US dollar exchange rate soars past $1.29 as UK ‘strikes financial services Brexit deal’ with EU
The pound made steady gains on Wednesday on suggestions that a Brexit deal could be finalised by the end of the month.

However Sterling really kicked it up a gear overnight amid reports of a UK-EU financial services deal, with GBP/EUR jumping to €1.1351, GBP/USD rising over 1% to $1.2904 and GBP/CAD surging to C$1.6920. These gains have failed to carry over into GBP/AUD and GBP/NZD however as they hold steady at AU$1.8053 and NZ$1.9545 respectively.

Looking ahead, the pound may look to extend these gains again during today’s session should the Bank of England (BoE) strike a more optimistic tone as it concludes its latest policy meeting.

What’s been happening?       

The pound leapt higher in trade yesterday, with the UK currency recouping the majority of Tuesday’s losses on suggestions that a Brexit deal could be finalised within three weeks.

In a letter to MPs published yesterday, Brexit Secretary Dominic Raab said he expects a Brexit deal to be ready by 21 November, providing the UK with just enough time to allow for legislation to be passed.

The news was met by positive reactions from markets, with GBP investors apparently willing to overlook Raab’s remarks regarding ‘remaining obstacles’ on the hopes that the end may finally be in sight.

Sterling’s gains were then further extended in overnight trade as markets welcomed reports Theresa May had stuck a deal with the EU to ensure the UK’s financial sector would have continued access to the Eurozone.

This upswing in Sterling saw the GBP/EUR exchange rate climb to a one-week high on Wednesday, with the euro forced to cede ground despite data showing Eurozone inflation was close to striking a six-year high in September.

Meanwhile the US dollar also failed to hold off the pound’s advances yesterday, with the GBP/USD exchange rate climbing back above $1.28 as a stronger-than-expected expansion in US ADP employment figures failed to trim the ‘greenback’s’ losses.

What’s coming up?

The Bank of England’s latest rate decision will be the main focus for currency markets today.

While no policy changes are expected from the midday rate decision by the Bank of England, the recent jump in UK wage growth could be reflected in a more hawkish outlook from policymakers, potentially leading to further gains in the pound.

Meanwhile the US dollar may look to push back later this afternoon, with the latest ISM manufacturing PMI forecast to show US factory growth continued to expand at a robust pace in October.

Finally with no Eurozone data of note set to be released today the euro may find itself vulnerable to losses, especially if the focus returns to Italy’s budget saga.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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