The British pound is lower against the US dollar on Monday.
The dollar is undergoing a small rebound, helped in part by a research note from investment bank Goldman Sachs that predicted it could rise another 3-5%.
The pound fell against the dollar but by less than other currencies after it was revealed post-Brexit technical trade talks would take place this week by telephone.
Pound versus US Dollar was down by 55 pips (-0.43%) to 1.2402 with a daily range of 1.2317 to 1.2469 as of 4pm GMT.
GBP/USD has been moving around the 1.24 level since reaching it on Friday (27th). Last week the exchange rate rose a massive 7%.
British pound limits losses on trade hopes
After a blistering rally last week, the pound was taking a pause on Monday, down slightly versus the dollar, although up against many others. The gains last week coincided with huge returns in the stock market, meaning they were potentially part of a ‘bear market rally’.
News today was supportive of the pound so limited the downside. Technical talks between the EU and UK are taking place this week by phone according to Prime Minister Boris Johnson’s spokesman. Some of the cause for concern that had carried GBP/USD down to 35-year lows was that of a No Deal Brexit. Any rebound will likely be limited while official policy is that if no agreement is reached by June, it means the UK walking away.
Dollar rallies as Goldman predicts 3-5% upside
Perhaps the dollar was already due a technical rebound because last week was one of the steepest weekly declines since 2009. The biggest gains on Monday were against the Loonie (USD/CAD) which was suffering because of another rout in oil prices that sent WTI crude below $20 per barrel.
Goldman Sachs suggesting more upside to come helped the buck’s cause. Goldman noted: “The real trade-weighted Dollar has perhaps 3-5% upside from the latest highs, in our view. This would take the Dollar close to its peak during the last bull market (which ended in February 2002) and key crosses (e.g. EUR/USD and USD/CAD) to levels which might prompt debate over US-reacted intervention.”
