GBP/USD exchange rates have risen above 1.30 this week following renewed optimism that there will be some kind of deal agreed on Brexit soon. The expectation for the pound ahead is of course volatility but the growing expectation for more positive, or less negative news, has helped the currency to strengthen.
Continued turmoil in the main political parties has also triggered volatility as investors await further news on what lies ahead. With the recent Labour and Conservative party deserters, investors are having to deal with further uncertainty ahead.
The outlook at present is weakness on the US dollar, as the market absorbs the recent backtracking in interest rate hike expectations. The US was expected to look at a further 3 interest rate hikes this year, investors are now very keen to monitor future developments. Last night in their recent Federal Reserve Minutes, the US central Bank confirmed they are not likely to be proceeding with any further hikes citing global risks.
Overall, there had been a renewed optimism for the resolution in the trade wars, which could help us to see a stronger US dollar. The ongoing uncertainty will surely only see the US dollar weaker, because of the weight it puts on the global economy.
The next stages of this will be the expectation on whether or not GBP/USD rates will remain above or below 1.30, will surely stem from the next direction on Brexit. Next week is the meaningful vote which could see some big movements as investors try to position themselves for the next direction on GBP/USD rates.
In this kind of market it is very sensible to be aware of the potential for sudden, sharp movements. Whilst I feel GBP/USD levels could now remain above 1.30, as Brexit confidence rises, there is still the possibility of a no-deal to spook the market which would see the pound lower.
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