Brexit was back in focus on Wednesday weighing on demand for the pound. The pound US dollar exchange rate dipped to a nadir of US$1.3081 before closing 0.15% lower at US$1.3105. The pound is edging higher in early trade on Thursday.
With U.K. Parliament back in session, Brexit has returned to the foreground for pound investors. European Commission President Ursula Von Der Leyen spoke at LSE on Wednesday. She said that the U.K. would need to stick close to EU rules in order to agree a far-reaching trade deal. Ursula Von der Leyen also said that it would be impossible to reach a comprehensive trade deal by the end of the transition period, in less than a year’s time.
Newly elected Prime Minister Boris Johnson was also clear that he would not be extending the transition period. The two sides acknowledge that talks will be tough. However, both sides appeared to want a deal to be done and this offered some support to the otherwise downbeat pound.
Today Brexit will remain under the spotlight as Parliament votes on the Brexit Withdrawal Bill. The bill will need to clear both the House of Commons and the House of Lords before being enshrined into law. Given Boris Johnson majority in Parliament no hold ups are expected.
Macro-economic data is lifting the pound in early trade on Thursday after data from British Retail Consortium showed like for like sales increased 1.7% in December year on year, up from a dismal -4.9% decline in November.
Dollar Eases Post Trump Speech
The dollar pulled backed from early highs on Wednesday as investors’ fears over escalating US – Iran tensions eased following President Trumps comments at a press conference. The safe haven dollar advanced following Iran’s attack on US military basis in Iraq. However, comments by Trump that there were no casualties from the attacks and that “Iran appears to be standing down” helped calm investors, boosting demand for riskier assets.
Also underpinning the dollar was better than forecast ADP private payroll data. The report showed that 202,000 jobs were created in the private sector in December. This was above the 160,000 forecasts. The strong number bodes well for Friday’s non-farm payroll data. The most closely watched macro release of the year.
| 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. |
