GBP/USD: Pound At 10 Week Low On Brexit Fears & Dollar Strength

Pound sterling dived 2.3% versus the US dollar in the previous week, snapping a two-week wining streak whilst experiencing its worst loss since mid-December. The pair struck a low of US$1.2881, closing the week around that low as no trade deal Brexit fears dragged on sterling and encouraging US data as well as safe haven flows boosted the US dollar.

The pound US dollar exchange rate in edging lower as the new week kicks off, trading sub US$1.29 at a 10 week low.

GBP/USD: Pound Sterling lost ground across as fears of a no trade deal Brexit increased

Despite upbeat PMI figures the pound plummeted as investors became increasingly convinced that the UK and the EU will not agree a trade deal before the end of the transition period.

Boris Johnson made his position clear when he said that the UK would break with Brussels’ rules, as he laid out his vision of the EUR-UK future relation. Michel Barnier, however, insisted that the two side must be on the same level in order for a trade deal to be agreed.

If the transition period ends and no deal is agreed, the UK and the RU will abide by World Trade Organisation rules, a significant shortfall from their current position.

This week, the Brexit trade deal and Boris Johnson reshuffling his cabinet could overshadow any data. The economic calendar is relatively quiet expected a slew of data on Tuesday, including UK GDP.

US dollar

The dollar climbed across the previous week owing to strong US data and continued flows into safe havens amid the ongoing coronavirus outbreak. On Friday the dollar extended gains following the release of the US non-farm payroll, the most closely watched US macro data release across the month. The jobs report beat expectations and underscored the solid US jobs market. 

The rally in the dollar could have further to run as the new week begins as investors once again look towards coronavirus statistics. As the number of confirmed cases and the death toll continues to rise, fears over the economic impact on China’s economy and also the global economy is keeping safe havens, such as the dollar, in demand.  

Today there is no high impacting US data releases. Investors will look ahead to Federal Chair Jerome Powell’s semi-annual appearance before Congress on 11^th and 12^th February. 

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