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  • Brexit talks in focus for Pound (GBP), UK could compromise on some EU demands
  • US Dollar (USD) easing despite US – China spat
  • Protests in US continue, Trump threatens military force
  • AT 07:15 UTC, GBP/USD +0.3% at US$1.2530

The Pound is trading at a 1 month high in early trade on Tuesday. The Pound US Dollar exchange rate settled on Monday +1.2% at US$1.2494, on broad US Dollar weakness, reopening and Brexit optimism.

At 07:15 UTC, GBP/USD is trading +0.3% at US$1.2530 at the upper end of the daily trading range, although Brexit nerves could drag on demand for sterling going forward.

The final round of Brexit talks before a key June deadline will begin today. The Pound surged in the previous session and is extending gains on rumours that the UK government could compromise on EU demands for UK fisheries and a level playing field trade rules, if the European Union backs off from its maximalist demands. The rumours were given further backing when Chief EU negotiator Michel Barnier said that he expected the UK to break the impasse today when talks began. Brexit tensions are expected to remain high this week and could keep any gains in the Pound limited.

An absence of high impacting UK data today will keep investors attention firmly on Brexit.

The Dollar is easing back from earlier gains on Tuesday, after investors sought out its safe haven qualities even amid the optimism of the gradual reopening of economies and recovery from the coronavirus crisis.

US – China relations remain under the spotlight after two state owned enterprises were instructed to halt purchases of US farm imports. This is the clearest sign so far that the hard fought for US – China trade deal, agreed in January, could be under threat as the US and China clash over Hong Kong and the origins of covid-19.

Also unnerving investors and boosting demand for the safe haven US Dollar is the growing unrest in the US. Protests against the killing of George Floyd have continued across he US for a week amid widespread curfews and warning of military action from the President. Signs of a heavy-handed Trump, or the protests growing out of control could equally boost safe haven demand for the US Dollar.

There is no high impacting US data due for release today, leaving sentiment to drive trading.