GBP/USD rates continue to trade above 1.30, but how long will sterling continue to find protection above this key threshold?
The pound found some much-needed support over recent weeks, which was welcomed by those clients holding sterling currency positons after a sustained period of stagnation against the greenback.
Reports surfaced last week that a Brexit deal might be edging closer, which if confirmed would almost certainly bring with it an element of relief for the markets. These reports gathered pace over the weekend, with potential developments regarding the Irish border issue behind much of the positivity.
Despite this prospective progress in Brexit talks, the pound has failed to make any further inroads against the USD, which could ultimately be telling when trying to predict any short-term movement for the pair.
The greenback has found plenty of support around the current levels, with its value being supported by a booming US economy. President Trump announced last week that they had come to an agreement with Canada over a new NAFTA deal, an arrangement that is likely to be top heavy in terms of benefits for the US economy.
I think the USD is likely to remain well supported over the coming months when you consider this, as well as potential further interest rate hike from the Fed in December.
It is not just the US economy, which is helping to drive USD’s value. The current trade standoff between the US and China is putting pressure on the global markets which in turn is driving investor confidence lower. As a result, investors will likely move their funds into USD, a currency that has always been considered a safe haven in times of global economic uncertainty.
Looking at both sides and whilst Brexit sentiment is likely to have a significant impact on sterling’s value, I am wary about assuming that the current trend will continue. It would not be the first time that progress in negotiations has been touted, only to see them breakdown at the next turn.
The current value of USD looks far more sustainable and for that reason, the pound may once again find its 1.30 resistance level is seriously tested over the coming weeks.
Feel free to get in touch using the form below to request further information about the factors likely to impact USD rates in the short term. I’ll be happy to respond personally.