The GBP/USD exchange rate has struggled for direction amid a lack of major catalysts. The next major release for GBP will be Thursday’s BoE interest rate decision. Markets are still worried that the BoE could vote in favour of a cut with the bets sitting at around a 50/50 chance despite recent positive economic data. GBP and USD both have been weighed down by hard Brexit worries and the recent outbreak of the Coronavirus. Investors in GBP hope that the recent economic data will be enough to fend off the BoE’s cut despite the bets indicating it was not strong enough.
GBP/USD Exchange Rates Flat as Brexit Worries Continue for the Pound
GBP/USD remains modestly flat while heading into the London open on Tuesday. In doing so, the pair snaps the previous three-day declines. The uncertainty surrounding the post-Brexit trade deal between the EU and the UK has weighed on the pairing lately, the USD’s broad strength amid risk-off also dragged the quote down. The recent pullback could be due to the risk reset after a lack of major catalysts between the two ahead of the key events like the BoE rate decision on Thursday and upcoming Brexit talks.
The latest news surrounding Brexit is suggesting that the EU’s top Brexit negotiator Michel Barnier turned down the UK’s claims over no checks at the Northern Irish borders. Furthermore, the Irish Taoiseach Leo Varadkar noted that the EU will have the upper hand in Brexit talks that could miss the deadline but the UK leader “respectfully disagreed”.
BoE Decision Eyeballed by the Market as Coronavirus Spreads
On the economic front, the latest UK data has helped to lighten the odds of an interest rate cut from the Bank of England, but despite the positive figures, it seems to not be enough to eradicate the bets completely. Investors are still concerned that with a 50/50 chance of a cut, the BoE may still go ahead with it, leaving the GBP to tumble. Meanwhile, the outbreak of the Coronavirus in China has impacted the world. The market’s risk tone remains heavy as the fears of the outbreak continue with the World Health Organisation (WHO) terming the virus as “high” risk following its earlier “moderate” tag.
Looking ahead, attention will turn to the BoE on Thursday as they make their interest rate decision. GBP investors will hope the rate stays steady and that the currency can overcome the bets. Meanwhile Brexit talks during early February will be the next trigger for GBP/USD rates. Traders should also note the upcoming US data and risk headlines for intermediate direction on the pairing.
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