After the Easter recess Brexit now returns to the agenda with another round of volatility to be expected in these coming weeks. The pound to dollar exchange rate has struggled to gain momentum with rates falling below 1.30 for the GBP/USD pair. Data from the US has proven resilient despite the Federal Reserve looking to pause on any further interest rate hikes throughout 2019.
Industrial production data from last week saw a small decline on the month but still showed growth over the course of the year helping lend support to an already buoyant US dollar. The US dollar is maintaining the higher ground as a safe haven currency whilst other economies globally fear an economic downturn. Many central banks are now openly considering interest rate cuts which only highlights the reasoning why investors are moving to the safety of the dollar.
Brexit talks resume after the Easter break
Brexit will once again be the main talking point as far as GBP to USD rates are concerned with talks still ongoing between the Conservative and Labour parties. Where Brexit goes from here will very much depend on whether a compromise can be reached which will revolve around the workings of a customs union. To date the government has rejected any proposal of a customs union which would keep freedom of movement between Britain and the EU. The government has made clear it wants to avoid having to contest the European elections although preparations are firmly in place with polling cards having already been sent out to the public.
If a compromise solution is not found in these coming weeks then the government will need to put forward MEP’s to campaign. The Brexit Party headed up by Nigel Farage could see considerable support in the upcoming European elections to be held 23rd May and could see a twist in both British and European politics. In these unusual times in British politics any developments in these elections could result in major market reaction for GBP vs USD.
Economic data for the UK is light this week so focus will largely centre on British politics for the UK. There is a raft of US date which should offer some insight as the strength of the US property market focusing on mortgages and house prices as well as manufacturing activity in the US.
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