Last week the pound to US dollar exchange rates were the strongest for sterling in roughly two-months, as the continued sell off for the pound came to a halt as hopes for a Brexit breakthrough increased.
Boris to meet EU leaders: What could happen to GBP/USD exchange rates?
UK Prime Minister, Boris Johnson will be meeting French President Emmanuel Macron and German Chancellor Angela Merkel this week in advance of the G7 summit that will take place over the weekend. The Irish backstop is once again in the news as Boris Johnson hopes to scrap the deal put in place by his predecessor Theresa May and the EU, as Johnson adopts a more gung-ho approach to Brexit negotiations which could impact sterling in the lead up to the Brexit date on the 31st of October this year.
In the current backstop agreement Northern Ireland would remain aligned to some rules of the EU, and the single market which according to Boris Johnson is undemocratic so I would expect this topic to remain an issue in the lead up to Brexit. The DUP party which currently props up the Conservative government has remained unhappy with the backstop arrangement since its introduction and it’s one of the reasons that former Prime Minister May’s Brexit deal didn’t pass through Parliament.
UK & US economic data out this week: US Dollar index at 3 week highs
Economic data releases out of the UK are thin this week so politics is likely to remain a key driver of sterling value, and I think that any further breakdown in talks between the UK and EU this week could push the cable rate (GBP/USD) lower.
The US dollar on the other hand remains very strong with the US dollar index currently trading at a 3-week high after expectations of further stimulus packages to aid the global economy have boosted the dollar. The next Federal Reserve meeting regarding US monetary policy will be in September so if you wish to be updated in the event of any market movements between GBP/USD, do feel free to register your interest with me.