The pound to US dollar exchange rate has fallen lower after comments from US Fed policy maker Charles Evans spoke yesterday and gave an optimistic view of the economy. He cited strong growth between 1.75% and 2% throughout 2019 but also suggested inflation should remain close to the target of 2%. The upbeat outlook is keeping the markets guessing and could even pave the way forward for an interest rate increase later this year if the economic data performs well. The Fed had recently ruled out any further rate increases this year but it would seem now that nothing is being ruled out. The dollar would likely strengthen on the back of any positive economic data releases when it comes to growth which could see a rally higher in USD/GBP and USD/EUR.
Brexit meanwhile continues to move sterling exchange rates although the Easter recess will see a pause until MP’s return to Westminster. Following the extension which was agreed with the EU last week the pound has drifted lower against the dollar with rates for GBP to USD now sitting at 1.3070. Whilst the prospect of a No-deal Brexit have been greatly reduced the uncertainty over the final outcome of Brexit may now be having a negative impact on the British economy after almost 3 years since the referendum in June 2016.
As businesses try to plan around Brexit after such a long period, it is inevitable that the extended period may have a negative impact. Any downturn in the economy bodes badly for GBP vs USD and rates may have further to fall if the deadlock in parliament cannot be broken. Talks between the opposition Labour party to reach a compromise possibly with some form of customs union are by no means guaranteed to succeed and the pound will likely react on any developments from these discussions.
UK inflation data is released tomorrow morning and could help support the pound if inflation is holding up and increases to 2% as forecast. In the US focus will look to trade balance data tomorrow which is particularly important for dollar exchange rates at this time. Global trade is extremely topical with the ongoing US China trade war and the current negotiations to make a deal for future trade relations.
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