GBP/USD exchange rates have move backed above 1.30 this week, with the Pound now finding plenty of support around this key threshold for the pair.
Whilst GBP has yet to make any aggressive move above this level, those clients holding the Pound will be relieved to see it moving back towards some of the highs of the past six months.
This improvement has come despite the UK seemingly being no closer to agreeing a Brexit deal with the EU, ahead of the impending deadline next month. UK Prime Minister Theresa May is still trying to reopen negotiations with Brussels over the withdrawal agreement, with the Irish backstop being the most contentious issue it would seem.
The EU currently remain unmoveable in their stance and have stated on multiple occasions that they will not reopen talks and that there is no room for further negotiation over the Irish border issue. Whether these are hardball negotiation tactics or not is clearly the key question that the UK negotiating team will be asking themselves but at this moment, the chances of a deal being made by the March 29th deadline see unlikely at best.
This leads me to believe that investor confidence in the UK economy and ultimately the Pound cannot have been raised significantly, based on the continued uncertainty surrounding Brexit.
Fed softens stance on interest rate rises
This week’s move may be a market reaction to the recent comments made by the US Fed, indicating they were intended to reduce the pace of their interest rate hikes during the course of 2019.
This has cooled investors risk appetite for the USD, which in turn has then seen its value weaken slightly. This has inadvertently boosted Sterling’s value sufficiently for it to move back above 1.30.
Whether this move is sustainable will depend on external factors surrounding Brexit talks and any further softening of the UK monetary policy stance but with an extension to Article 50 now looking increasingly the most likely outcome, could we be in a further docile period as the markets to decipher their longer-term expectations for GBP/USD exchange rates.
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