Pound US dollar exchange rate breaks past $1.30 on fresh Brexit optimism

Philip McHugh February 20th 2019 - 2 minute read

The pound climbed to a two-week high against the euro on Tuesday and pushed higher against the US dollar amid an upswing in Brexit optimism.

Sterling appears to have run out of momentum this morning however, with GBP/EUR subdued at €1.1490, GBP/USD flat at $1.3040 and GBP/CAD dropping to C$1.7194, while GBP/AUD and GBP/NZD are both holding steady at AU$1.8197 and NZ$1.8979 respectively.

The highlight of today’s session is expected to be the latest FOMC minutes, with USD investors on the lookout for any hints that the current rate hike cycle may be coming to a close.

What’s been happening?

The pound strengthened during Tuesday’s trading session, lifted by a renewed sense of Brexit optimism.
This appeared to be driven by Junior Business Minister Richard Harrington’s comments suggesting that a no-deal Brexit is still unlikely and that he expects Parliament to take control of the process in the near future.
This helped Sterling pick up the pieces from earlier in the session after slightly softer-than-expected wage growth figures left the UK currency directionless. 

This allowed GBP/EUR to rocket to a fresh two-week high during yesterday’s session, with the euro unable to put up much resistance following the publication of a bleak economic outlook for Germany in the latest ZEW surveys.

Meanwhile, the GBP/USD exchange rate pushed back above $1.30 for the first time in nearly two weeks on Tuesday, with a lull in US economic data and a focus on US-China trade talks limiting the appeal of the US dollar.

What’s coming up?

Looking ahead, the main focus for markets today will likely be the minutes from the Federal Reserve’s most recent policy meeting.

This could see the US dollar weaken if the minutes signal that the Federal Open Market Committee (FOMC) is of the mind that the rate hike cycle has reached its natural conclusion.

Meanwhile, Theresa May will return to Brussels today where she will meet with European Commission President Jean-Claude Juncker for the latest round of Brexit negotiations, potentially resulting in some volatility in the pound depending on the outcome of the talks.

Finally, the publication of the Eurozone’s latest consumer confidence figures may put further pressure on the euro today if sentiment remained gloomy.

Written by
Philip McHugh

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