GBP/USD: Pair Dips On Brexit Concerns & Surge In Coronavirus Cases

The pound retreated from highs versus US dollar on Wednesday amid broad dollar strength and Brexit trade deal concerns.

Pound sterling US dollar exchange rate closed the session just marginally higher at US$1.2957 after hitting a 4-day peak of US$1.2991 earlier in the day.

The pair is edging lower in early trade on Thursday.

Pound

The pound pared gains as attention turned back towards Brexit ahead of the start of trade deal talks next month. The European Parliament approved a tough opening position for negotiations with the UK regarding the future relationship with the EU.

The UK will have to align closely and follow EU policies on a whole range of areas in order to achieve an ambitious far reaching trade deal. There are signs that the language being used by the EU is toughening up. When the first draft was released in early February there was no mention of alignment. However, the most recent version is clear that alignment is a prerequisite.

This, however, also means that there is less chance of Boris Johnson accepting such a deal and more chance of no trade deal being agreed. These fears of a no trade deal Brexit will keep sterling pressurized over the coming months.

US dollar

The dollar jumped higher in the US session on Wednesday as Jerome Powell had his second consecutive testimony before congress and as investors digested stronger than forecast mid tier data. Jerome Powell stuck with his cautiously optimistic message once again saying that he saw no reason why the US economic expansion couldn’t continue

Today the dollar remains in demand as flows into safe havens are on the rise again following a jump in the number of coronavirus cases. 242 deaths were recorded from Hubei province on Wednesday, the deadliest day of the outbreak. There was also a huge increase in the number of people infected, by 14,840.

US inflation data could push the dollar higher still. Analysts are expecting US inflation to increase 0.3% month on month in November, ahead of the 0.2% increase in December. On an annual basis inflation, as measured by the consumer price index is forecast to increase 2.5%, up from 2.3%. This still comfortably over the Fed’s 2% target. However, Jerome Powell has often said that he is comfortable with an over shoot in inflation.

Currencylive.com is a news site only and not a currency trading platform.

Currencylive.com is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.