- Pound (GBP) strong on upbeat Brexit news
- Covid R rate is falling in the UK latest study
- US Dollar (USD) eases as hopes of fiscal stimulus build
- Strong US ADP data adds to optimistic mood
The Pound US Dollar (GBP/USD) exchange rate is extending gains for a fourth straight session. The pair settled +0.4% higher on Wednesday at US$1.2916, having rallied to an almost 2 week high of US$1.2944. At 05:15 UTC, GBP/USD trades +0.2% higher at US$1.2940.
Hopes that the UK could be cracking the second wave of covid infections is boosting the mood towards the Pound. According to a study by Imperial College the R rate – the rate of infection, has fallen from 1.7 to 1.1 this month as tighter lockdown restrictions have been imposed. A R rate below 1 is when the virus is in decline.
Brexit optimism is also offering support to the Pound. As the 9th round of Brexit talks continue headlines suggest that the UK could be ready to compromise on some sticking points, which is aiding progress towards a deal.
Yesterday UK GDP for the second quarter was upwardly revised to -19.8% contraction vs -20.4% contraction initially recorded. Bank of England’s Chief Economist Haldane forecast a 20% GDP growth in the third quarter.
Attention will now turn towards UK manufacturing PMI data. Analysts are expecting a confirmation of September’s initial reading of 54.3.
The US Dollar is trending lower, trading at a one week low versus a basket of major peers after robust US data and amid optimism surround a US stimulus deal.
US Treasury Secretary Steven Mnuchin said that talks with House Speaker Nancy Pelosi went well and progress was being made on the long awaited rescue package. Hopes that the US government will prop up the economy has boosted demand for riskier assets whilst weighing on demand for safe havens such as the US Dollar.
Upbeat data has also be helping the mood in the market. US ADP payroll figures smashed expectations adding 749K new jobs in September, boding well for Friday’s non-farm payroll.