The pound tumbled over 1% versus the US dollar in the previous week. The pound US dollar exchange rate closed on Friday at US$1.2823, 50 points above the low of the week. That was the first weekly loss in three weeks. The pair is advancing in early trade on Monday. This week could be a very volatile week for the pair as investors factor in Brexit developments and the FOMC, US GDP and non-farm payroll.
Brexit uncertainty weighed on demand for the pound across the previous week. The British Parliament agreed to Boris Johnson’s Brexit deal. However, they rejected the Prime Minister’s plan to speed the Brexit bill through the House of Commons and the House of Lords. This means that the UK leaving the EU with a Brexit deal on 31st October is highly likely.
Meanwhile, the EU agreed that the UK required an extension to Brexit. However, the EU leaders couldn’t agree on a time frame. The majority of countries want to give the UK a three-month extension. France is pushing for a much shorter extension. Failure by the EU to agree raised levels of uncertainty and hit the pound.
Reports over the weekend suggest that the EU will offer an extension until January 2020. This is lifting the pound on Monday. The EU are also expected to agree to no further Brexit renegotiation.
Boris Johnson wants to call a general election. Parliament is due to vote on this today. The Prime Minister must win two thirds of the votes in the House of Commons in order to call a general election. The prospect of further political uncertainty weighed on the pound last week. That said, there are doubts that he will achieve the necessary figures.
Dollar Looks Ahead To Busy Week
The dollar gained ground against its peers in the previous week. Dollar rose following signs that the the US manufacturing sector was stabilising. A key gauge measuring US factory orders jumped for a second straight month in September, after months of declining. The data helped calm fears over the health of the US economy.
This week is an important week for the dollar with several of the most closely followed high impacting events expected. These include the Federal Reserve monetary policy announcement, where analysts expect the Fed to cut interest rates again. Investors will be watching carefully to see if the Fed is planning on cutting again this year or whether it has come to the end of its cutting cycle.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 GBP = 1.28934 USD
Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound.
Or, if you were looking at it the other way around:
1 USD = 0.77786 GBP
In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar.